U.S. equity futures slipped on Wednesday, indicating that the Dow Jones was extending its decline a day after its biggest drop since February, as investors waited for new inflation data that could test their appetite for stocks and obligations.
Futures on the S&P 500 edged down 0.2%, a day after the broad equity gauge posted its biggest drop since early March. Contracts for the technology-intensive Nasdaq-100 fell 0.4%. Contracts on the Dow Jones Industrial Average, which suffered its biggest drop since late February, fell 0.2%.
This could lead the Federal Reserve to raise its short-term interest rate target sooner than it announced, potentially weighing on stocks and other assets that have benefited from more than a year of costs. borrowing close to zero. For their part, several Fed officials said the economy still needs support from low rates.
Concerns that a surge in inflation could prove to be more intense and longer lasting than investors had expected have heightened attention to the inflation data for April, which is expected to be released at 8:30 a.m. ET. Economists polled by the Wall Street Journal expect the consumer price index to jump 3.6% last month from a year earlier, from 2.6% in March. This would be the highest 12-month level since the summer of 2011.
“The markets are very sensitive to levels of headline and core inflation right now,” said Edward Park, chief investment officer of UK investment firm Brooks Macdonald. “There are fears that the Federal Reserve could lose control if there are signs that the inflation backdrop is prolonged.”
Many bond and stock investors believe the Fed will keep its monetary policy loose, “but at the same time, that belief is being tested by things like [last week’s] jobs report, ”added Park. “The markets feel confused and conflicted.”
The yield on 10-year U.S. Treasuries fell to 1.614% from 1.623% on Tuesday. Yields, which fall when bond prices rise, have climbed for three consecutive trading sessions but remain below their March high of 1.749%.
Other factors have also pushed stocks down in recent days, including signs that the US economy – while continuing to grow at a rapid pace – has exceeded its maximum growth rate, said Anna Stupnytska, global economist at Fidelity International. The market was also vulnerable after a sharp rise in prices at the start of the year.
“The main concern is that… due to rising inflation, central banks will start to tighten,” Ms. Stupnytska said. She believes that US inflation will come down next year and that the Fed will not hike rates until 2023. Yet Fidelity International’s multi-asset funds have bought inflation-protected Treasury securities, gold and industrial metals to protect against inflation.
In commodities markets, futures contracts on Brent, the benchmark in energy markets, rose 0.6% to $ 68.94 per barrel. The glut of crude and petroleum products that accumulated towards the start of the pandemic mainly dissipated among members of the Organization for Economic Co-operation and Development, the International Energy Agency said in a report. monthly report.
Iron ore futures hit new highs in New York City, jumping 5% to $ 226.01 per metric tonne. The prices of the steel ingredient have skyrocketed due to strong demand from China.
The overseas markets were mixed. Gains in telecoms and utilities stocks helped push the Stoxx Europe 600 up 0.4% after the index posted its biggest drop since December on Tuesday.
Commerzbank shares jumped 6.4% after the German lender improved its earnings outlook for the year and reported unexpected profit for the first quarter. ABN Amro Bank fell 8.9% after the Dutch bank posted a loss for the first quarter, in part due to a settlement with prosecutors over a money laundering investigation.
In Asian markets, Taiwan’s Taiex fell 4.1% after the government tightened restrictions on coronaviruses. Japan’s Nikkei 225 fell 1.6% at the close and China’s Shanghai Composite was up 0.6%.
Write to Joe Wallace at [email protected]
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