U.S. stock futures struggled for direction on Wednesday, leaving Wall Street potentially on course for a third consecutive day of losses, as investors fret that soaring inflation is damaging the world’s biggest economy and battering corporate profits.
What’s driving markets?
Equities are limping towards the end of a miserable first half of the year. The S&P 500 is down 19.6% so far in 2022, hit by concerns that inflation rates at multi-decade highs are badly damaging household sentiment and that the Federal Reserve’s response to surging prices may tip the economy into recession.
On Tuesday, the Conference Board’s consumer-confidence index dropped in June to a 16-month low of 98.7, with consumers’ outlook on the state of the economy at the most cautious in nearly 10 years. The news helped turn early gains for Wall Steet into heavy losses, with the Nasdaq Composite shedding 3%, leaving the tech-heavy index nursing a loss of 28% for the year to date.
“Last week, U.S. equity markets rallied on the back of the arcane logic that a U.S. recession would mean a lower terminal Fed funds rates and thus, was bullish for stocks… That premise was boosted by weak Michigan Consumer Sentiment data,” said Jeffrey Halley, senior market analyst at OANDA, in a note to clients.
“Overnight, even weaker U.S. Conference Board Consumer Confidence data provoked the opposite reaction, with U.S. stocks plummeting,” he added.