Stock futures fall as volatility grips markets

US stock futures fell Monday morning to amplify last week’s losses, as investors looked for more data this week on inflation and earnings to gauge the strength of the economy and corporate earnings as the Federal Reserve continues to tighten monetary policy.

Contracts on the S&P 500 fell more than 2% before the market opened. This contributed to the losses after the index posted a weekly decline for the fifth time in a row last week. Nasdaq futures fell an additional 2.7% during pre-market trading and Dow futures fell more than 500 points.

Investors are waiting this week for more data on US inflation, which will help show how much more aggressive the Fed needs to be to curb heightened price pressures. Wednesday’s consumer price index (CPI) and Thursday’s producer price index (PPI) for April are expected to show a slowdown in price increases, suggesting March was the peak in the pace of price increases across the economy.

This data will come in the wake of the Fed’s latest monetary policy decision and the press conference of Federal Reserve Chair Jerome Powell, who was faced with heightened volatility among risky assets. Stocks shot up and then fell, and government bond yields rose after the monetary policy decision, as investors estimated whether the tools at the central bank’s disposal will be enough to prevent inflation from becoming further entrenched while sustaining economic growth. to hold.

“We knew the Fed was going to raise rates by 50 basis points — it was the most telegraphic hike in human history. But the markets sold it. And then they finally did and it’s like, okay, it’s done, Eric Diton, president and director of The Wealth Alliance, told Yahoo Finance Live on Friday. “And so you got a lot of short coverage and you got a big rally.”

“That wasn’t the real deal. The real deal was what followed… and that’s that there’s a huge amount of uncertainty,” he added. “Yes, we know the Fed is going to raise. How often are they going to raise? There is a huge difference between where the rates are and where the inflation is. Will the Fed have to rise to 6% or 7%, or will inflation Will they meet in the middle? That uncertainty is one of the big factors that keeps this market going down.”

Other concerns about economic growth have also increased recently, as Russia’s war in Ukraine and renewed virus-related lockdowns in China raised concerns about further lingering supply chain disruptions. Many strategists agreed that the next market moves in this context would be determined by the Fed’s response to inflation.

“Looking ahead, the path of the market will depend on the Fed’s fight against inflation,” David Kostin, chief strategist for US equities at Goldman Sachs, wrote in a note. “In our base case, the negative impact on valuations of higher real rates will be partially offset by a narrowing yield gap. As recession risk increases, interest rates may fall, but not enough to prevent multiple sand stock prices from falling further .”

Meanwhile, the earnings season continues this week with big names including Disney (DIS), Peloton (PTON) and Rivian Automotive (RIVN) reporting results. According to FactSet, 85% of the S&P 500 components have reported actual results to date. And as of Friday, projected earnings growth for the S&P 500 was 9.1%, which, if maintained, would be the slowest gain for the index since Q4 2020, falling below the average growth rate of 15.0% over five years. year. †

7:43 a.m. ET Monday: Stock Futures Open Little Changed

This is where the markets traded Monday morning:

  • S&P 500 futures (NL=F: -85 points (-2.06%) to 4,034.50

  • Dow futures (YM=F: -555 points (-1.69%) to 32,254.00

  • Nasdaq futures (NQ=F -337 points (-2.65%) to 12,358.75

  • rough (CL=F: -$2.65 (-2.41%) to $107.12 per barrel

  • Gold (GC=F: -$25.10 (-1.33%) to $1,857.70 per ounce

  • 10-year treasury (^TNX: +5.3 fps to yield 3.177%

NEW YORK, NEW YORK – MAY 06: Traders work on the floor of the New York Stock Exchange (NYSE) on May 06, 2022 in New York City. After a day of more than 1,000 points drop over inflation fears, the Dow Jones Industrial Average fell more than 200 points in morning trading. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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