Stock futures fall as investors digest Fed hawk remarks as well as sanctions

Futures on US stocks fell on Wednesday morning as investors considered new Western sanctions against Russia and digested the hawkish remarks of key monetary policy executives. This suggests that more members of the Federal Reserve were prepared to take aggressive action to raise interest rates and reduce demand and ever-increasing inflation.

Contracts on the S&P 500 fell, adding losses after the Blue Chips index ended Tuesday’s session down 1.3%. Contracts for each of the Dow and Nasdaq also extended the decline. In the bond market, the benchmark yield on 10-year Treasury bonds rose to 2.6%, the highest level since May 2019.

The development of Russia’s war in Ukraine and the reaction of the West remained in the spotlight on Wednesday, when the United States, the European Union and the Group of Seven prepared another round of sanctions against the Kremlin. The United States is expected to impose fines on more Russian government officials and members of their families, as well as Russian-owned businesses and financial institutions.

Meanwhile, hawkish comments from Federal Reserve officials also knocked U.S. stocks off the last march up and led to an increase in Treasury profitability.

Namely, Federal Reserve Governor Lael Brainard said on Tuesday that the Federal Open Market Committee (FOMC) is “ready to take more decisive action” when already elevated inflation rates and expectations justify such steps.

Speaking on the webcast, Brainard suggested that this could include an aggressive rise in interest rates and a much faster sagging balance of the Federal Reserve, which has so far risen to nearly $ 9 trillion than in previous periods.

“Given that the recovery was much stronger and faster than in the previous cycle, I expect the balance to shrink much faster than in the previous recovery, with much higher limits and a much shorter period before the maximum restraint phase compared to 2017– 19 “, – said Brainard. She noted that the process of reducing the balance sheet holdings of the Fed or the beginning of quantitative tightening may begin as soon as the next meeting of the Fed in May.

Other Fed members have also suggested that they support tougher policies in the short term. San Francisco Fed President Mary Daly told the Financial Times on Tuesday that the proposal to raise interest rates by 50 basis points – or an increase of twice the typical central bank increase for each meeting – had “grown”.

“The fact is that the Fed has made it very clear … it’s important that they keep up with inflation and do their best to hold back inflation,” said Quincy Crosby, LPL Financial’s chief equity strategist, in an interview with Yahoo Finance Live. . “They’re going to do it, and I think the market feels it’s going to be a difficult path.”

“The Fed can go until something breaks … but it is clear that this is their mission, and they are going to move forward, in full swing – more than 2017, more than 2018,” she added, referring to the latter. time the Federal Reserve was quantitatively strengthened several years ago.

With U.S. inflation levels still hovering around 40-year highs and forcing the Fed to tighten financial conditions, some Wall Street have lowered their expectations regarding U.S. growth and global growth. Deutsche Bank economists said Tuesday they expect the U.S. to go into recession late next year as the Fed quickly raises rates to address high prices.

“Now we expect that by the end of next year the US economy will be in a complete recession [Euro area] amid declining growth in 2024 with rising unemployment, “said Deutsche Bank economists David Falkerts-Landau and Peter Hooper.” inflation to established levels, reducing the risk of major disruptions in the future.

However, economists noted that their call for next year’s recession “is now coming out of consensus” – and indeed, many on Wall Street still see a slowdown, but not necessarily a period of negative growth in the near future within the country.

“We don’t think the Fed will push the economy into recession,” Veronica Willis, an investment strategy analyst at Wells Fargo Investment Institute, told Yahoo Finance Live on Tuesday. “I think most don’t expect that. But we’re expecting some sort of slowdown in economic growth compared to what we expected before, but still about average economic growth here in the United States.”

7:16 a.m. ET: Stock futures fall

Here’s where the markets traded on Wednesday morning:

  • S&P 500 futures (ES = F): -38 points (-0.84%) to 4,482.25

  • Dow Futures (YM = F): -214 points (-0.62%) to 34,336.00

  • Nasdaq Futures (NQ = F): -203 points (-1.37%) to 14,625.00

  • Raw (CL = F): +1.42 dollars (+ 1.39%) to 103.38 dollars per barrel

  • Gold (GC = F): + $ 4.70 (-0.24%) to $ 1,922.80 per ounce

  • 10-year treasury (^ TNX): +8.3 bp up to 2.637%

6:10 pm ET Tuesday: Futures on stocks are higher

Here’s where the markets traded on Tuesday night when the night session began:

  • S&P 500 futures (ES = F): +5.25 points (+ 0.12%) to 4,525.50

  • Dow Futures (YM = F): +34 points (+ 0.1%) to 34,584.00

  • Nasdaq Futures (NQ = F): +25.75 points (+ 0.17%) to 14,853.75

NEW YORK, NEW YORK – MARCH 30: Traders are trading on the New York Stock Exchange on March 30, 2022 in New York. U.S. stocks opened low after a rally earlier in the week. (Photo by Michael M. Santiago / Getty Images)

Emily McCormick is a Yahoo Finance reporter. Follow her on Twitter.

Read the latest financial and business news from Yahoo Finance

Keep an eye on Yahoo Finance Twitter, Instagram, YouTube, Facebook, Flipboardand LinkedIn

Leave a Comment