U.S. stocks declined on Monday as investors turned cautious going into an eventful week that includes the Federal Reserve’s rate decision and a slew of big-tech earnings. 

The Nasdaq 100 suffered its worst day since Dec. 22 while the S&P 500 fell the most since Jan. 18. Declines in Apple Inc. and Microsoft Inc. weighed on both the indexes as investors await earnings from companies including Alphabet Inc. and Meta Platforms Inc. this week. 

Treasuries dropped, with yields climbing across the curve. The benchmark 10-year rate rose to around 3.55 per cent after ending last week around 3.50 per cent. A dollar index rose. Oil fell, with the West Texas Intermediate sliding below US$78 a barrel as traders await clues about the Fed’s path ahead. 

The Fed is widely expected to raise rates by a quarter percentage point on Wednesday, slowing its pace for a second straight session. But traders will be watching for the tone officials set for future meetings. Fed Chair Jerome Powell has continued to push back against traders anticipating rate cuts later this year, emphasizing that he won’t budge until inflation has eased meaningfully. Stocks have still rallied in January, with investors seemingly brushing off Powell’s “higher-for-longer” warning. 

“Investors seem to have forgotten the cardinal rule of ‘Don’t Fight the Fed.’ Perhaps this week will serve as a reminder,” a team of Morgan Stanley strategists led by Michael Wilson wrote in a note. Investors adding to the rally in stocks this month will be disappointed if they’re in direct defiance of the Fed, the strategists said.

Citi Global Wealth’s Kristen Bitterly echoed this, saying that January’s rally was technical as it was largely driven by 2022’s “laggards and losers.”

Traders are also awaiting the U.S. jobs report later this week. A less tight labor market is a key goal for the Fed. Investors have also been parsing a slew of earnings reports, with more to come throughout the week. Signs of earnings pressure have been raising concerns about the health of the economy and the outlook for equities.

 “The week ahead will not only be a Fed story, as Friday’s employment situation report will provide clarity on the strength of the labor market to start the new year,” wrote Ben Jeffery and Ian Lyngen of BMO Capital Markets.

The European Central Bank and the Bank of England are also each projected to hike by half a percentage point when they deliver decisions a day after the Fed. 

Key events this week:

• China industrial profits, PMIs, Tuesday
• Eurozone GDP, Tuesday
• U.S. Conference Board consumer confidence, Tuesday
• Earnings Tuesday include: UBS, Unicredit, Snap and Advanced Micro Devices
• Eurozone Manufacturing PMI, CPI, unemployment, Wednesday
• U.S. construction spending, ISM Manufacturing, light vehicle sales, Wednesday
• FOMC rate decision, Fed Chair Jerome Powell press conference, Wednesday
• Earnings Wednesday include: Meta Platforms and Peloton Interactive
• Eurozone ECB rate decision, President Christine Lagarde press conference, Thursday
• UK BOE rate decision, Thursday
• U.S. factory orders, initial jobless claims, U.S. durable goods, Thursday
• Earnings Thursday include: Alphabet, Apple, Amazon, Qualcomm and Deutsche Bank and Santander
• Eurozone S&P Global Eurozone Services PMI, PPI, Friday
• U.S. unemployment, nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.3 per cent as of 4:01 p.m. New York time
• The Nasdaq 100 fell 2.1 per cent
• The Dow Jones Industrial Average fell 0.8 per cent
• The MSCI World index rose 0.2 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.2 per cent
• The euro fell 0.2 per cent to US$1.0847
• The British pound fell 0.3 per cent to US$1.2349
• The Japanese yen fell 0.4 per cent to 130.46 per dollar

Cryptocurrencies

• Bitcoin fell 4.5 per cent to US$22,714.77
• Ether fell 5.4 per cent to US$1,554.46

Bonds

• The yield on 10-year Treasuries advanced four basis points to 3.54 per cent
• Germany’s 10-year yield advanced eight basis points to 2.32 per cent
• Britain’s 10-year yield advanced one basis point to 3.34 per cent

Commodities

• West Texas Intermediate crude fell 2.3 per cent to US$77.81 a barrel
• Gold futures fell 0.4 per cent to US$1,937.80 an ounce