US stock futures plunged in early trading on Tuesday, but US Treasury yields rose as the stock and bond market crash continued.
Futures on the S&P 500 (^GSPC) are down 0.9%, while futures on the Dow Jones Industrial Average (^DJI) are down 220 points, or 0.8%. Nasdaq Composite (^IXIC) contracts also fell about 0.8% after the tech-focused index started the week at its lowest level since July 2020. Meanwhile, his benchmark 10-year Treasury bond rose 4% again.
Investors are navigating a dark week marked by producer and consumer inflation data and the first reporters of the third-quarter earnings season involving four of the country’s largest banks.
Markets have outperformed the government’s consumer price index (CPI), indicating inflation remains persistently high despite aggressive intervention by the Federal Reserve to slow the economy. There is a possibility that The S&P 500 fell more than 4% on its worst day ever after August’s consumer price index was released.
Federal Reserve Vice Chairman Lael Brainerd said policymakers should not raise rates amid continued global macroeconomic uncertainty, as previous rate hikes have affected the economy as a whole. said we must be cautious about
“By moving forward in a cautious and data-dependent manner, we can learn how economic activity, employment and inflation are adapting to cumulative tightening, and inform our assessment of the path of policy rates. Yes.” At the annual meeting of the Business Economics Association, the US central bank appears to be stepping up its pace for a fourth 75 basis point rate hike in November.
On Monday, JP Morgan CEO Jamie Dimon said in an interview with CNBC that the stock could “easily fall 20%” from current levels, depending on the economic consequences of the Fed’s actions. He also warned that the U.S. economy could enter a recession by midterm. -2023.
Across the Atlantic, the Bank of England expanded its second emergency bond purchase this week after selling long-term gold coins on Monday in a bid to stabilize financial conditions.
“This market malfunction and the potential for self-reinforcing ‘fire sale’ dynamics pose significant risks to the UK’s financial stability,” the World Bank said in a statement.
The Bank of England’s move helped the gold price rise, but had little effect on the declining British pound as the US dollar strengthened and continued to put pressure on other currencies.
In the United States, the strength of the U.S. dollar caused by the monetary policy of the Federal Reserve has hurt corporate America, reducing sales and profits by trampling on income earned abroad on products purchased at a weaker currency. I’m here. Currency headwinds have hit companies such as Nike (NKE) and FedEx (FDX) in recent weeks and may be mentioned by other companies reporting financial results.
“While we may hear more in the coming weeks about the pressure that a very strong dollar could put on US exports and, in turn, US corporate earnings, the strength of the dollar means that the Fed will continue to tighten policy. It could also have an impact on ‘retreating’ from,” said Chris Larkin, managing director of trading at Morgan Stanley’s E*TRADE, in an email. “Even if continued dollar strength ultimately contributed to the Fed’s switch from rate hikes to rate cuts, the timing of such a pivot is uncertain and may not change the downward trajectory of corporate earnings. .”
Alexandra Semenova is a reporter at Yahoo Finance. follow her on her twitter @alexandraandnyc
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