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U.S. stock futures fell Wednesday as concerns grew that the Fed may have to be more aggressive than recently thought if it is to push inflation back down to its 2% target.
How are stock-index futures trading
-
S&P 500 futures
ES00,
-0.31%
dipped 15 points, or 0.4% to 4130 -
Dow Jones Industrial Average futures
YM00,
-0.20%
fell 86 points, or 0.3% to 34035 -
Nasdaq 100 futures
NQ00,
-0.41%
eased 58 points, or 0.5% to 12573
On Tuesday, the Dow Jones Industrial Average
DJIA,
fell 157 points, or 0.46%, to 34089, the S&P 500
SPX,
declined 1 point, or 0.03%, to 4136, and the Nasdaq Composite
COMP,
gained 68 points, or 0.57%, to 11960. The S&P 500 is up 15.63% from its 52-week low of 3577.03 hit Wednesday, October 12, 2022.
What’s driving markets
Investors are revising their initially sanguine reaction to news that U.S. inflation remains stubbornly elevated, nudging down stock futures on concerns the Federal Reserve may keep interest rates higher for longer.
Wall Street on Tuesday delivered a choppy and ultimately mixed performance after data showed headline consumer price inflation moderating from 6.5% in December to 6.4% last month.
However, the deceleration was less than expected and this — along with further hawkish Fed rhetoric — has caused the market to imply the central bank may now take rates up to 5.3% this year and possibly not begin cutting borrowing costs until 2024. Just a few weeks ago the market thought rates might peak at 4.9%.
“[T]he initial positive reaction in S&P 500 futures [to the inflation report] seemed weird and most likely reflected clearing of hedges and other derivatives positions. The market [has]eventually settled on the interpretation that inflation remains stubbornly high, and the trajectory lower might take longer than expected,” said Peter Ganry, head of equity strategy at Saxo Bank.
“The dilemma for investors is that if the economy does not slip into a recession then high inflation will remain and eventually push on bond yields and likely increase the equity risk premium leading to lower equity valuations…This morning the index futures trade lower again around the 4,127 level with the 4,100 level naturally being the key level to watch on the downside,” he added.
Another important U.S. economic update will come at 8:30 a.m. on Wednesday, when the January retail sales report is published. Economists are forecasting growth of 1.9% compared a fall of 1.1% in December.
Other data includes the February Empire State manufacturing index at 8:30 a.m.; Industrial production for January at 9:15 a.m.; and the NAHB home builders’ index for February at 10 a.m.. All times Eastern.
