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Equity futures prolong the downturn as inflation weighs on confidence

US stock futures fell Wednesday morning to build on Tuesday’s losses, as investors remained focused on growing signs of a slowdown in US economic growth.

Contracts on the S&P 500 fell by about 0.2% on Wednesday morning after a 2% drop in the index the day before. Dow futures declined, and Nasdaq futures fell around 0.3% as technology stocks remained under pressure.

Bitcoin also fell, with prices falling just below $ 20,000. West Texas intermediate crude oil futures rose above $ 112 a barrel for the first time in two weeks, while 10-year government interest rates fell below 3.2%.

The recent onslaught of cross-market volatility came amid renewed concern over the impact of inflation on the growth prospects of the US economy. A new report this week showed a fall in US consumer confidence to a 1[ads1]6-month low and a weakening in short-term expectations to a 9-year low, which raises concerns that consumers will curb consumption in anticipation of persistently high prices.

Given these and other recent reports, some Federal Reserve officials have highlighted the risk that inflation expectations will be entrenched among consumers, allowing the central bank to maintain its hawkish stance for the time being.

“The fact that prominent prices for gasoline and food remain high suggests that there is some risk that long-term inflation expectations for households and businesses will continue to rise,” Cleveland Federal Reserve President Loretta Mester said in a comment Wednesday.

She suggested she would support a new 75 basis point rate hike in July if economic conditions look the same through the Fed’s meeting next month, which reflects recent support from other officials for such an increase. The markets are currently pricing a more than 80% probability that an interest rate increase of 75 basis points will eventually take place in July, according to data from CME Group.

These expectations for a series of larger than typical interest rate hikes have continued to be a pressure point for technology stocks, in particular, which are highly valued on the outlook for future earnings growth. The Nasdaq Composite remains solid in a bear market, down 28.5% so far this year, and both the technology-heavy information technology and communications services sector in the S&P 500 have lagged behind the broader index.

“The fear of inflation remains, and the Fed needs to step in more aggressively and raise interest rates further, and that’s very, very bad for technology stocks,” Opimas chief executive Octavio Marenzi told Yahoo Finance Live on Tuesday. “The Fed is not done with its rate hikes by any means … I do not expect any turnaround here soon. I think this is a downturn that has some legs.”

Equity futures prolong the downturn as inflation weighs on confidence

NEW YORK, NEW YORK – JUNE 27: Traders work on the floor of the New York Stock Exchange (NYSE) June 27, 2022 in New York City. The Dow Jones Industrial Average opened lower in morning trading that came from last week’s market rally. (Photo: Spencer Platt / Getty Images)

On the go

  • Pinterest (PINS) The shares rose during pre-market trading after the company said that Google and PayPal CEO Bill Ready will take the place of Pinterest co-founder Ben Silbermann as CEO of the social media platform. Analysts have suggested that Ready’s experience suggests he can help further Pinterest’s expansion plans to expand shopping opportunities on the platform.

  • Nine (NIO) Shares fell Wednesday morning to increase losses after shorts seller Grizzly Research released a report claiming the electric car maker was involved in “accounting difficulties” to achieve financial targets. Nine responded with a statement saying the report “is non-profit and contains many errors.”

  • Upstart Holdings (OPPST) Shares fell sharply Wednesday morning after Morgan Stanley downgraded the stock to Underweight from Equal-Weight and cut the company’s price target to $ 19 per share from $ 88 seen earlier, according to Bloomberg. Morgan Stanley indicated that the consumer lending platform would come under pressure due to the cyclical nature of the business.

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

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