Stock Market Today: Stocks steady with inflation data and earnings in focus

Check back for updates throughout the trading day

U.S. equity futures edged lower Monday, while the dollar held steady against its global peers and Treasury yields dipped, as investors looked to a key inflation reading later in the week to build on the S&P 500's record close last Friday.

Markets ended higher to close out the week, with the S&P 500 ending north of the 5,000-point mark for the first time, amid a pullback in Federal Reserve interest rate cut bets that remains offset by stronger-than-expected fourth-quarter earnings and powering tech stocks.

Investors remain concerned about the lack of market breadth, however, with only four stocks – Amazon  (AMZN) , Meta Platforms  (META)  Microsoft  (MSFT)  and Nvidia  (NVDA) – contributing nearly 75% of the S&P 500’s total return this year, according to LPL Financial's chief technical strategist Adam Turnquist.

Stocks are also trading at the richest levels relatively to their earnings generation in more than two years, suggesting that the major benchmarks could be due for corrective price action over the coming weeks.

Tuesday's inflation report in fact could be the first test of this early winter rally, which has seen the S&P 500 rise more than 5.38% and the Dow Jones Industrial Average test the 39,000 mark.

Economists estimate headline CPI eased to 2.9% in January, according to Wall Street forecasts, but core prices are likely to hold at December levels of 3.9%, indicating the ongoing challenge Fed policymakers face in bringing inflation back to their preferred 2% target. 

Retail sales data are also expected on Thursday, and any suggestion that price pressures are accelerating while a resilient job market supports consumer spending could prompt another reset of Fed rate projections.

At present CME Group's FedWatch suggests only a 15.5% chance that the Fed will start cutting rates next month, with the odds of reductions starting in May pegged at around 61%.

Markets will also work through another week of December-quarter earnings reports, with updates from Coca-Cola  (KO) , Cisco  (CSCO) , Deere  (DE) , Applied Materials  (AMAT)  and Roku  (ROKU)  among the 45 S&P 500 companies reporting this week. 

So far this season, around 80.7% of 332 companies reporting have topped Wall Street forecasts, well ahead of the long-term average of 66.6% and the 76.4% average of the past four quarters, according to LSEG data.

Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 are priced for a 12 point opening bell dip while those linked to the Dow suggest a 26 point pullback.

The tech-focused Nasdaq, which is up 6.52% for the year, is priced for a 2 point opening bell gain.

In overseas markets, Europe's Stoxx 600 was marked 0.37% higher in early Frankfurt trading, while Britain's FTSE 100 slipped 0.16% in London.

Overnight in Asia, where markets in China remain closed for the week for Lunar New Year celebration, the regionwide MSCI ex-Japan benchmark slipped 0.24% into the close of trading while the Nikkei 225 ended 0.09% higher in Tokyo.

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