May 16, 2022

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US stock futures point to an extension of Wall Street selling

US stock futures point to an extension of Wall Street selling

US stock futures fell, putting major indexes on track to extend losses after one of the worst selling on Wall Street since the pandemic began.

Futures linked to the Dow Jones Industrial Average fell 0.3%, a day after the blue-chip index plunged more than 1,000 points, its worst day since 2020. S&P 500 futures were down 0.5% while tech-heavy Nasdaq 100 futures were down 0.5%. by 0.6%.

Stocks have been losing ground in recent days as investors tried to gauge the impact of the Federal Reserve’s plan to raise interest rates on the economy. Investors are trapped between competing hopes: These price increases will be large enough to tame rapidly rising inflation, but not so large that they will derail economic growth.

“The market is trying to balance whether central banks are more concerned about inflation or weak growth, and the market has clearly decided they are more concerned about inflation,” said Altaf Kassam, Head of Investment Strategy for EMEA at EMEA. State Street Global Consultants. “If the Fed is going to fight inflation at all costs, it will certainly have an impact on stocks.”

US stocks rose on Wednesday after the Federal Reserve raised interest rates by… half a percentage pointbuoyed by relief that it was not actively considering larger increases ahead, but that relief faded Thursday as investors reassessed stock expectations.

Federal Reserve Chairman Jerome Powell said on Wednesday that the central bank agreed to raise the interest rate by half a percentage point in an effort to bring down inflation that has reached its highest levels in four decades. Photo: Win McNamee / Getty Images

Frank Benzemra, head of Asian equity strategy at Société Générale, said US market valuations have “goed from rich to very rich” in the past 10 years as stock prices have risen more than earnings. But he said that as interest rates rise, the value investors place on companies’ future cash flows is decreasing.

In the bond markets, the yield on the 10-year US Treasury rose to 3.074% from 3.066% on Thursday, the highest level since November 2018. Bond yields rise with lower prices.

One reason for the volatile volatility in the markets: Investors lack a clear haven as bonds and gold have come under pressure from rising interest rates.

“To deal with this volatility, you need a reserve but fixed income is not the barrier it used to be,” said Mr. Kassam.

Brent crude, the global oil standard, rose 1.6% to $112.70 a barrel, extending its recent streak of gains driven by expectations that the European Union is intent on banning Russian oil imports in response to the invasion of Ukraine. Gold prices rose 0.2%.

Bitcoin fell 0.8% to $36,152, after falling more than 8% on Thursday as market selling encouraged investors to exit risky bets such as cryptocurrencies.

Investors were waiting for data on the state of the labor market, a strong point for the US economy as the unemployment rate approached a 50-year low. This also led to higher wages which added to inflationary pressures. The April jobs report, due at 8:30 AM ET, is expected to show another strong month for job gains.

Japanese stocks bucked the broader downtrend as the Tokyo market reopened after three days of holidays.


picture:

Kazuhiro Nogi/AFP/Getty Images

Abroad, benchmark indices slipped in both Asia and Europe, tracking losses in the United States, with declines most notable for the tech-heavy Hang Seng Index, which fell 3.8%. In China, the Shanghai Composite Index is down 2.2%. In Europe, the Stoxx Europe 600 Continental Index was down 1.2%.

Japanese stocks bucked the broader downtrend as the Tokyo market reopened after three days of holidays, with the Nikkei 225 index up 0.7%.

write to Rebecca Feng at rebecca.feng@wsj.com and Will Horner at William.Horner@wsj.com

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