US stock futures tumbled in early trading on Tuesday, while Treasury yields rose as equity and bond markets continued to slide.
S&P 500 futures (^GSPC) sank 0.9%, while futures linked to the Dow Jones Industrial Average (^DJI) sank 220 points, or 0.8%. Nasdaq Composite (^IXIC) contracts also fell about 0.8% after the tech index hit the lowest level since July 2020 at the start of the week. Meanwhile, the benchmark 10-year Treasury tested 4% again.
Investors are navigating a murky week marked by consumer and producer inflation data and the first reports of the third-quarter earnings season, which include four of the country’s largest banks by assets.
Markets remain nervous about the government’s Consumer Price Index (CPI), which is likely to show that inflation remained stubbornly high despite aggressive Federal Reserve intervention to slow the economy. Following the release of the August CPI report, the S&P 500 plunged more than 4% on its worst day of the year so far.
In a rare admission, Federal Reserve Vice Chair Lael Brainard said policymakers need to be cautious about raising rates amid global macroeconomic uncertainty as previous hikes still work their way through the economy.
“Moving forward deliberately and in a data-dependent manner will allow us to learn how economic activity, employment and inflation are adjusting to the cumulative adjustment to inform our assessments of the path of the policy rate,” he said in the National on Monday. annual meeting of the Association for Business Economics, as the US central bank appears to be on track for a fourth 75 basis point hike in November.
On Monday, JPMorgan Chief Executive Jamie Dimon said in an interview with CNBC that stocks could fall an “easy 20%” from current levels, depending on the economic outcome of the Fed’s actions, also warning that the The US economy could enter a recession in mid-2023.
Across the Atlantic, the Bank of England expanded its emergency bond purchases for the second time this week after a sell-off in long-term gilts on Monday in an effort to stabilize financial conditions.
“The dysfunction in this market and the prospect of a self-reinforcing ‘fire-sale’ dynamic pose a significant risk to UK financial stability,” the Bank warned in a statement.
The Bank of England move helped prop up gilt prices but did little to help sterling slide as the US dollar’s strength rises and continues to pressure other currencies.
In the US, the dollar’s firmness as a result of the Fed’s monetary actions has been a pain for US companies, cutting sales and profits by trampling on foreign-earned revenue from products bought with weaker currencies. Currency headwinds have dealt a heavy blow to the likes of Nike (NKE) and FedEx (FDX) in recent weeks and are likely to be cited by others reporting financial results.
“We may hear more in the coming weeks about the pressures an exceptionally strong dollar may have on US exports and therefore US corporate profits, but the strength of the dollar could also play a role. role in getting the Federal Reserve to ‘roll back’ on its tightening policy. Chris Larkin, Morgan Stanley’s managing director of E*TRADE trading, said in an emailed comment. “Although even if the continued strength of the dollar eventually contributes to the Fed turning from raising rates to cutting them, the timing of such a turn remains uncertain and may not change the downward trajectory of corporate earnings.”
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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