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U.S. stock futures were mixed on Thursday, as investors react to the Federal Reserve’s tightening plans and its impact on the increasingly volatile bond market.
What’s happening
-
Futures on the Dow Jones Industrial Average
YM00,
+0.04%
fell 63 points, or 0.2% to 34336. -
Futures on the S&P 500
ES00,
+0.21%
dropped 1.75 points, or 0%, to 4474. -
Futures on the Nasdaq 100
NQ00,
+0.43%
increased 25.5 points, or 0.2% to 14531.
On Wednesday, the Dow Jones Industrial Average
DJIA,
fell 145 points, or 0.42%, to 34497, the S&P 500
SPX,
declined 44 points, or 0.97%, to 4481, and the Nasdaq Composite
COMP,
dropped 315 points, or 2.22%, to 13889.
The S&P 500 closed below its 200-day average and is down 6% on the year.
What’s driving markets
Minutes from the last Federal Open Market Committee meeting, released Wednesday, showed the central bank weighing a plan to reduce its bond holdings by $95 billion per month as it tries to stamp out surging inflation. The Fed’s caution hit tech stocks in particular on Wednesday.
“It’s not surprising to see that growth names are leading the losses, given the well-known rate sensitivity of these megacap stocks, with the Nasdaq now almost 5% off recent highs,” said Michael Brown, head of market intelligence at Caxton. “While, near-term, I remain cautious on equities, I also think that these names are likely to outperform over the medium-term as economic activity slows and the market places a premium on growth.”
Rates analysts at Bank of America say the 10-year yield
TMUBMUSD10Y,
could reach 3%, even though they see fair value in the 2.05% to 2.7% range.
“Risks of a decoupling of 10yT to this fundamental range increase, given: (1) the market prices a higher probability of a reset of longer term inflation expectations and implicitly of the neutral rate view; and (2) a challenging supply/demand backdrop that exacerbates near-term bearish dynamics and increases the potential for overshoots vs. fundamentals,” said the BofA analysts led by Bruno Braizinha.
The economics calendar features releases on jobless claims and consumer credit. St. Louis Fed President James Bullard, who has called for the fed funds rate to climb above 3% this year, is due to speak.
Market attention also will be on HP
HPQ,
after Warren Buffett’s Berkshire Hathaway
BRK.B,
disclosed that it had taken an 11% stake in the maker of personal computers.
