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Inventory futures rise from final January session, S&P heads for worst month since March 2020

Traders work on the floor of the New York Stock Exchange at the opening bell on January 25, 2022.

TIMOTHY A.CLARY | AFP | Getty Images

Stock futures were higher in overnight trading on Sunday as investors braced for the final trading day of what could be the worst month for the S&P 500 since March 2020.

Dow futures rose 33 points. S&P 500 futures were up 0.14% and Nasdaq 100 futures were up 0.29%.

January has proven to be a dismal month for equities. The S&P 500 is heading for its worst month since the pandemic-related market turmoil in March 2020 as investors worry about inflation, supply chain issues and impending Federal Reserve rate hikes.

The average for the 500 stocks is approaching correction territory, down more than 8% from its intraday high earlier this month. The S&P 500 is down 7% in January.

The Dow Jones Industrial Average is also heading for its worst January since March 2020. The Dow is down 4.4% this month.

The Nasdaq Composite, which is about 15% below its record closing level in November, is heading for its worst month since October 2008 and worst first month of the year on record. The tech-focused average is down 12% in January.

Also, the small-cap benchmark Russell 2000 is in a bear market.

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Last week, the Federal Reserve said it was likely to raise interest rates for the first time in more than three years to combat historically high inflation. Markets are now pricing in five quarter-point rate hikes in 2022.

The major moving averages saw wild swings last week, with the Dow moving a heartbreaking 1,000 points in either direction. The Dow ended the week up 1.3%. The S&P 500 gained 0.8% last week and the Nasdaq was roughly flat this week.

"All of this is adding market volatility until investors digest this transition period," said Michael Arone, chief investment strategist at State Street Global Advisors. “On the other hand, the economy should keep expanding, earnings are pretty good. That's enough to support the markets, but I think they're adjusting to the change in monetary policy, fiscal policy and earnings.”

Earnings season continues this week with major reports from Alphabet, Starbucks, Meta Platforms, Amazon and more. According to FactSet, about a third of S&P 500 companies reported fourth-quarter earnings, and 77% beat Wall Street's earnings expectations.

"This week will be all about whether the correction low is already in or whether last Monday's intraday low will be challenged and breached again," said Jim Paulsen, chief investment strategist at Leuthold Group. "The longer the S&P stays above last Monday's low or moves higher, the more calm will return and fundamentals could start dominating emotions again as they drive the market."

There are also important economic data this week, the most important of which is Friday's January jobs report.

– CNBC's Patti Domm contributed to this report.

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