Dow futures drop 200 points as Fed decision, tech earnings await

The S&P 500 has pushed 6% higher this year, and riskier plays such as the ARK Innovation ETF
ARKK,
+5.54%
have done even better, with Cathie Wood’s flagship fund up 29% in 2023.

What’s driving markets

It’s a big week for both corporate earnings and macroeconomic data, with the Federal Reserve interest rate decision coming Wednesday and nonfarm payrolls set for release on Friday.

Over the weekend, The Wall Street Journal focused on Fed staffers’ view of inflation, and in particular their worries that job-matching will remain inefficient, which suggests price pressures could persist despite recent data showing a sharp decline in goods inflation.

Seth Carpenter, chief global economist at Morgan Stanley, told clients in a note this weekend that he doesn’t share those worries. Because of market concentration, there are higher profit margins, and therefore more room to let margins shrink after wage upswings. Combined with lower unionization rates compared to the 1980s, “all the information at hand simply points to a low probability that current wage inflation is a critical issue — even with services.”

Tech giants Apple
AAPL,
+1.37%,
Alphabet
GOOGL,
+1.90%
and Amazon
AMZN,
+3.04%
highlight a huge slate of corporate earnings this week. Tech stocks in particular have rallied this month as bond yields have eased.