Dow futures down over 300 points as losing first half closes and Fed’s favorite inflation gauge looms

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U.S. stock futures fell sharply on Thursday as traders anticipated the release of closely monitored inflation data by the Federal Reserve, and Wall Street was preparing for its worst first half of the year since of 1970.

How are stock index futures traded?
  • Futures S&P 500 ES00,
    it fell 1.4% to 3,766

  • Dow Jones Industrial Average YM00 Futures,
    fell 1.1% to 30,653

  • Nasdaq 100 futures COMP,
    fell 1.8% to 11,477

On Wednesday, the Dow Jones Industrial Average DJIA,
+ 0.27%
rose 82 points, or 0.3% to finish at 31,029.31. The S&P 500 SPX,
it lost 0.1% to 3,818.83. The Nasdaq Composite COMP,
it lost less than 0.1%, closing at 11,177.89.

Wednesday’s stock was shaken, leaving the CBOE VIX volatility index,
+ 5.68%
– an indicator of the expected volatility of the stock market – rose to 28.2, compared to its long-term average around 20.

What is driving the markets?

The S&P 500 was about to bring its losses by 2022 to more than 20%. Since reaching a high of close to 4,800 in early January, the U.S. benchmark index has plunged amid investor fears that rising inflation is affecting consumer confidence and hurting consumer confidence. global economy.

Reads: What happens to the stock market after the worst first half since 1970? Here is the story.

Sentiment has also been affected by Russia’s invasion of Ukraine, a move that has heightened geopolitical anguish and contributed to a sharp rise in energy and food prices.

In previous recent episodes of market outbursts, such as the sale of COVID-19 in 2020, investors could seek relief from central banks. But with inflation in most major economies at its highest level in many decades, monetary guardians like the Federal Reserve are underscoring their commitment to tighten policy to ease price pressures. Although this means harming growth and, consequently, business profits.

Federal Reserve Chairman Jerome Powell said Wednesday he sees a path back to 2% inflation, but warned that “there was no guarantee we could do it.” while maintaining a strong labor market.

“I don’t imagine stocks will recover until the U.S. rate market estimates more significant Fed cuts,” Stephen Innes, managing partner of SPI Asset Management, said in a note to clients.

“The Fed’s implicit prices have fallen in recent weeks – from a maximum of 4% to more than 3.50%. But that’s a lot of risk of a rate hike for the market to digest,” he said.

Powell will have a sharp view of the data released before the Wall Street opening bell. The PCE core price index for May, maturing at 8:30 a.m. Eastern Time, is one of the Fed’s preferred price guides and can determine the rate at which the central bank rises. interest rates.

Weekly unemployment claim numbers and consumer spending reports that are due at the same time should also give a clue as to whether households are suffering from higher inflation and the Fed’s tightening cycle.

10-year US Treasury yield TMUBMUSD10Y,
it dropped 5 basis points to 3.053%, reflecting a move toward perceived paradises. The deterioration in risk appetite has pushed bitcoin BTCUSD,
it was returning below $ 20,000, where it was quoted on Thursday.

Added to traders ’anxiety is the company’s second-quarter earnings season, which will kick off in the coming weeks. Recent reports from consumer-oriented companies such as Bed Bath and Beyond BBBY,
– have been badly received.

Better news emerged from Asia, where a survey of China’s manufacturing sector saw an expansion for the first time since March after COVID-19 restrictions were eased. The Shanghai Composite SHCOMP,
+ 1.10%
increased 1.1% in response.

The mood in Europe was cautious, as traders followed the fall of US futures, with the Stoxx 600 SXXP,
decrease of 1.5%.

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