Futures fall as concerns over rate hike persist

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., August 17, 2022. REUTERS/Brendan McDermid/File Photo

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  • Futures down: Dow 0.85%, S&P 1.09%, Nasdaq 1.46%

Aug 22 (Reuters) – Wall Street futures fell on Monday, setting the three major U.S. equity indices for a lackluster start to the week, as investors worried about hawkish signals from Federal Reserve policymakers amid the slowdown of economic growth.

A four-week summer rally for the Nasdaq and S&P 500 erupted last week as mega-cap growth companies slumped on Friday, with the benchmark 10-year Treasury yield hitting nearly 3% on fears of inflation.

High-growth and tech companies such as Apple Inc (AAPL.O) and Tesla Inc (TSLA.O) fell 1.5% and 2.1%, respectively, in trading ahead of Monday’s bell.

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Lenders JPMorgan Chase & Co (JPM.N) and Bank of America (BAC.N) fell more than 1% each amid broader risk sentiment. Banking giants collectively face more than $1 billion in regulatory fines for employee use of unapproved messaging tools, including email and apps such as WhatsApp. Read more

The CBOE Volatility Index (.VIX), Wall Street’s fear gauge, hit 23.10, its highest level in more than two weeks.

This week, the focus is on Fed Chairman Jerome Powell’s speech at a central bank conference in Jackson Hole on Friday for further clues to the monetary policy tightening trajectory of the central bank.

“The market is currently going through a phase of digestion, triggered by weaker than expected economic reports and anxiety ahead of the statements and policy indications that are expected to emerge from the Jackson Hole economic symposium,” said Sam Stovall, chief market strategist. investments at CFRA Research.

“The big uncertainty remains the magnitude of the rate hike at the September FOMC meeting.”

According to economists in a Reuters poll, the Fed will raise rates by 50 basis points in September as inflation is expected to peak and recession worries grow.

Traders are also expecting a slightly higher likelihood of a 50bps hike from a third 75bps hike, although several Fed policymakers pushed back on expectations of a dovish pivot and stressed that the fight against inflation was continuing.

Investors will also be looking for details of the central bank’s plans to shrink its balance sheet by nearly $9 trillion, a process that began in June. Read more

The Fed’s favorite inflation indicator, the PCE price index, will also be released this week.

As recession fears linger and investors are eager for any clues about the economy’s strength, more US data will be closely awaited this week, including flash PMIs, the second estimate of second-quarter GDP and consumer sentiment from the University of Michigan.

As of 7:07 a.m. ET, Dow e-minis were down 286 points, or 0.85%, S&P 500 e-minis were down 46 points, or 1.09%, and Nasdaq 100 e-minis were down 193.25 points, or 1.46%.

Signify Health Inc (SGFY.N) jumped 40.5% following a report on Sunday that UnitedHealth Group Inc (UNH.N), Amazon.com Inc (AMZN.O), CVS Health Corp (CVS .N) and Option Care Health Inc (OPCH.O) are candidates to acquire the company. Read more

AMC Entertainment Holdings (AMC.N) fell 31.5% after its counterpart Cineworld (CINE.L), the world’s second largest cinema operator, was warned of a possible bankruptcy filing.

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Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Shounak Dasgupta

Our standards: The Thomson Reuters Trust Principles.

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