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Tuesday, October 4, 2022
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Dow futures slump nearly 200 points as investors brace for more Fed tightening

U.S. stock futures traded lower Monday, as investors braced for more Federal Reserve interest-rate tightening later this week.

What’s happening
  • Futures on the Dow Jones Industrial Average
    DJIA,
    -0.45%

    fell 190 points, or 0.6%, to 30732.

  • Futures on the S&P 500
    ES00,
    -0.87%

    dropped 26.25 points, or 0.7%, to 3864.

  • Futures on the Nasdaq 100
    NQ00,
    -1.00%

    decreased 98.5 points, or 0.8%, to 11835.

On Friday, the Dow Jones Industrial Average
DJIA,
-0.45%

fell 139 points, or 0.45%, to 30822, the S&P 500
SPX,
-0.72%

declined 28 points, or 0.72%, to 3873, and the Nasdaq Composite
COMP,
-0.90%

dropped 104 points, or 0.9%, to 11448.

The S&P 500, down four of the past five weeks, has dropped 19% this year.

What’s driving markets

The market focus was firmly on the upcoming Federal Open Market Committee meeting, which is due to end Wednesday.

A rate hike of three-quarters of a point is expected, and attention will be put on the accompanying dot plot of rate porjections.

“The 2023 median, effectively communicating the Fed’s terminal rate, may be 4.25-4.5%. Despite the dramatic upward revisions to policy rate projections, risks remain skewed to the upside: it is much easier to see scenarios where policy rates reach above 5% than where the cycle terminates below 4%,” said economists at Citi led by Andrew Hollenhorst.

Andrew Sheets, chief cross-asset strategist at Morgan Stanley, said cash and short-term fixed income increasingly offer lower volatility and high yield. He points out the yield on U.S. 1-to-5 year credit of 4.9%, compares to the 5.9% earnings yield of the S&P 500, but the stock-market index has been 5.7 times more volatile over the last 30 days.

The cryptocurrency complex was getting hit particularly hard, with bitcoin
BTCUSD,
-6.61%

trading below $19,000. Gold futures also fell, with the lead contract
GC00,
-0.67%

down about $12 per ounce.

The U.K. stock market was closed in observance of the funeral for Queen Elizabeth II, with heads of state including U.S. President Joe Biden in London.

Source

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