Stock futures inch higher ahead of a busy week of earnings

U.S. stock index futures were modestly higher during overnight trading Sunday as Wall Street looks ahead to a busy week of earnings.

Futures contracts tied to the Dow Jones Industrial Average added 0.25%. S&P 500 futures were up 0.4%, while Nasdaq 100 futures advanced 0.5%.

The major averages are coming off a losing week, despite a Friday relief rally that saw the Dow jump more than 650 points. The 30-stock benchmark shed 0.16% on the week. The S&P 500 and Nasdaq Composite fell 0.93% and 1.57%, respectively.

Friday’s relief rally came as traders bet that the Federal Reserve will be less aggressive at its upcoming meeting. The Wall Street Journal reported Sunday that the central bank is on track to lift interest rates by 75 basis points at its meeting later this month.

Still, it was the second negative week in the last three for all the major averages. Recession fears have been front and center in recent weeks as market participants worry that aggressive action from the Fed — in an effort to tame decades-high inflation — will ultimately tip the economy into a recession.

“Markets are likely to remain volatile in the coming months and trade based on hopes and fears about economic growth and inflation,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a recent note to clients.

“A more durable improvement in market sentiment is unlikely until there is a consistent decline both in headline and in core inflation readings to reassure investors that the threat of entrenched price rises is passing,” he added.

A batch of economic data drove last week’s wild market action.

Inflation jumped 9.1% in June, a hotter-than-expected reading and the largest increase since 1981. That, in turn, led traders to bet that the Fed could raise rates by a full percentage point at its meeting at the end of July.

By the end of the week, however, some of those fears retreated on the back of a strong retail sales number as well as comments from some Fed officials.

Fundstrat Global Advisors’ Tom Lee attributed some of Friday’s rally to the retail sales number, which showed the economy is “slowing but not broken.”

“I think this pushes the Fed to be more measured…I think that the upside risk is much greater now than the downside risk,” Lee said Friday on CNBC’s “Closing Bell Overtime.” “I’m in the camp that stocks have bottomed,” he added.

A busy week of earnings is coming up after JPMorgan and Morgan Stanley kicked things off last week.

Bank of America, Goldman Sachs and Charles Schwab are on deck to provide quarterly updates on Monday before the market opens. IBM will post results after the closing bell.

Later in the week, we’ll hear from Johnson & Johnson, Netflix, Lockheed Martin, Tesla, United Airlines, Union Pacific, Verizon and a host of other companies.