(Bloomberg) — US stock-index futures fell as concerns over the Federal Reserve’s aggressive rate-hike path outweighed robust corporate earnings and China’s stimulus plans.
September contracts on the S&P 500 Index slipped 0.3% after the equity benchmark posted modest gains Tuesday amid a rally in retailer stocks. Nasdaq 100 futures retreated 0.5% signaling a selloff in technology names will continue. The dollar and Treasury yields rose as investors awaited the minutes of the Fed’s last policy meeting for clues on policy makers’ sensitivity to weaker economic data.
US stocks have rallied on signs of peaking inflation and an earnings-reporting season that saw four out of five companies meeting or beating estimates. Yet, continuing rate hikes and the likelihood of a recession in the world’s largest economy are weighing on sentiment. Meanwhile, concern is growing that Fed rate setters will remain focused on the fight against inflation rather than supporting growth.
“We expect the FOMC minutes to have a hawkish tilt,” Carol Kong, strategist at Commonwealth Bank of Australia Ltd., wrote in a note. “We would not be surprised if the minutes show the FOMC considered a 100 basis-point increase in July.”
Earlier on Wednesday, stocks rose in Asia amid speculation that China may deploy more stimulus to shore up its ailing economy. After a string of weak data driven by a property-sector slump and Covid curbs, China’s Premier Li Keqiang asked local officials from six key provinces that account for 40% of the economy to bolster pro-growth measures.
Some of those equity gains were surrendered when European trading opened and the focus turned to the Fed as well as UK inflation that soared to double digits for the first time in four decades. Europe’s Stoxx 600 traded little changed.
The S&P 500 had posted a small gain on Tuesday, aided by earnings reports from retailers Walmart Inc. and Home Depot Inc.
The dollar drifted higher on Wednesday. Treasuries fell, with the 10-year yield adding 6 basis points and the two-year rate climbing five basis points. The spread between these two yields remained inverted at about 45 basis points.
Oil fluctuated between gains and losses, and was in sight of a more than six-month low — reflecting lingering worries about a tough economic outlook amid high inflation and tightening monetary policy.
Inflation remains the most closely-watched indicator in the second half. Will it come down gradually, or will it stay elevated, forcing the Fed to keep raising rates aggressively? Have your say in the anonymous MLIV Pulse survey.
Here are some key events to watch this week:
- Federal Reserve July minutes, Wednesday
- UK CPI, US retail sales, Wednesday
- Australia unemployment, Thursday
- U.S. existing home sales, initial jobless claims, Conference Board leading index, Thursday
- Fed’s Esther George, Neel Kashkari speak at separate events, Thursday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 was little changed as of 9:11 a.m. London time
- Futures on the S&P 500 fell 0.3%
- Futures on the Nasdaq 100 fell 0.5%
- Futures on the Dow Jones Industrial Average fell 0.2%
- The MSCI Asia Pacific Index rose 0.4%
- The MSCI Emerging Markets Index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0161
- The Japanese yen fell 0.4% to 134.82 per dollar
- The offshore yuan was little changed at 6.7899 per dollar
- The British pound was little changed at $1.2087
Bonds
- The yield on 10-year Treasuries advanced six basis points to 2.87%
- Germany’s 10-year yield advanced seven basis points to 1.04%
- Britain’s 10-year yield advanced 10 basis points to 2.22%
Commodities
- Brent crude fell 0.6% to $91.80 a barrel
- Spot gold fell 0.2% to $1,772.50 an ounce
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