U.S. stock futures fell on Wednesday morning as investors noted Western sanctions against Russia and digested the hawkish views of key monetary policymakers. These suggested that more and more members of the Federal Reserve are ready to move aggressively to raise interest rates, reduce demand and keep inflation in check.
The S&P 500 contracts fell, adding to the losses after the blue-chip index fell 1.3% in Tuesday’s session. The contracts of Dow and Nasdaq each extended the decline. In the securities market, the benchmark 10-year treasury dividend rose to 2.6%, its highest level since May 2019.
Russia’s war in Ukraine and advances on the Western response focused on Wednesday, with the United States, the European Union and seven groups preparing another round of sanctions on the Kremlin. The United States is also expected to impose fines on Russian government officials and family members, as well as Russian-owned companies and financial institutions.
Meanwhile, hockey comments by Federal Reserve officials also knocked US stocks out of their recent rally and boosted Treasury yields.
That said, Federal Reserve Governor Lale Brinard said on Tuesday that the Federal Open Market Committee (FOMC) is “ready to take strong action” and that indicators and expectations of already inflated rates should guarantee such moves.
Speaking on a webcast, Brynard said that this would include aggressive interest rate hikes and a sharp fall in the Federal Reserve’s balance sheet – which has so far risen to almost $ 9 trillion – more than in previous periods.
“Because the recovery was significantly stronger and faster than the previous cycle, I expect the balance sheet to shrink significantly significantly faster than the previous recovery. 2017-19,” Brinard said. He noted that the process of reducing the central bank’s balance sheet or initiating austerity measures could begin during the next meeting of the central bank in May.
Other Fed members also suggested that in the short term there would be more policy austerity on the board. San Francisco Fed President Mary Daley told the Financial Times on Tuesday that a 50 basis point interest rate hike – or double the size of the central bank’s regular addition increase – has “grown”.
“The truth is that the central bank has made it very clear … that it is important that they go after inflation and do whatever it takes to prevent inflation from rising,” Quincy Krosby, lead stock strategist at LPL Financial, told Yahoo Finance Live. “They’re going to do it. I think the market will feel this is going to be a confusing path.”
“The central bank may go until it breaks something … but it is clear that their purpose is, and they are going to move it forward with full steam – over 2017, over 2018,” he added. The Federal Reserve was subject to size tightening several years ago.
Inflation in the US is still at a 40-year high and is forcing the central bank to tighten its grip on financial conditions, with some on Wall Street lowering expectations for US and global growth. Deutsche Bank economists said on Tuesday that the U.S. expects the recession to end at the end of next year as the central bank raises rates rapidly to address higher prices.
“We now expect the U.S. economy to be in a complete recession by the end of next year [Euro area] Deutsche Bank economists David Folkerts-Landau and Peter Hooper have said that the growth slowdown will be accompanied by unemployment in 2024. “Our basic premise is that these growths will slow growth in other parts of the world at the same time. Time will help bring inflation back under control and reduce the risk of further roadblocks. “
However, economists noted that their call for a recession next year was “currently out of consensus” – in fact many on Wall Street still see a recession, but a period of negative growth domestically is not necessary.
Veronica Willis, an investment strategist at the Wells Fargo Investment Institute, told Yahoo Finance Live on Tuesday, “We do not think the federal economy is going to go into recession. I think most people do not expect that. But we expect a slowdown in economic growth than we previously expected, but still average economic growth here in the United States. “
7:16 am ET: Stock futures fall
Here is where the markets traded on Wednesday morning:
S&P 500 Futures (ES = F): -38 points (-0.84%) 4,482.25
Dow Futures (YM = F): -214 points (-0.62%) 34,336.00
Nasdaq Futures (NQ = F): -203 points (-1.37%) 14,625.00
RawCL = F): + $ 1.42 (+ 1.39%) to $ 103.38 a barrel
Gold (GC = F): + $ 4.70 (-0.24%) $ 1,922.80 per first ounce
10 year treasury (DNX): +8.3 pps yield 2.637%
6:10 pm and Tuesday: Stock futures rise
Here is where the markets will trade once the session starts overnight on Tuesday evening:
S&P 500 Futures (ES = F): +5.25 points (+ 0.12%) to 4,525.50
Dow Futures (YM = F): +34 points (+ 0.1%) 34,584.00
Nasdaq Futures (NQ = F): +25.75 points (+ 0.17%) to 14,853.75
Emily McCormick is a Yahoo Finance correspondent. Follow her on Twitter.
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