U.S. stock index futures fell Friday as investors pushed toward the perceived safety of bonds and the U.S. dollar as a wave of central bank interest rate hikes across Europe fueled concerns that too-aggressive central banks could drive a global recession.
How are stock-index futures trading?
-
S&P 500 futures
ES00,
-0.73%
fell 22.75 points, or 0.5%, to 4,401 -
Dow Jones Industrial Average futures
YM00,
-0.55%
fell 105 points, or 0.3%, to 34,106 -
Nasdaq-100 futures
NQ00,
-1.04%
slid 115.25 points, or 0.7%, to 15,0987
On Thursday, the Dow industrials
DJIA,
fell 4.81 points, or less than 0.1%, to close at 33,946.71. The four-day slide is the blue-chip gauge’s longest losing streak since a five-day drop that ended on May 25, according to Dow Jones Market Data. The S&P 500
SPX,
rose 16.20 points, or 0.4%, to end at 4,381.89. The Nasdaq Composite
COMP,
gained 128.41 points, or 1%, finishing at 13,630.60.
What’s driving markets
Concerns that central banks may be too aggressive in raising interest rates to quell inflation and thereby derailing global economic growth were back on the table for Friday, after fresh data showed a loss of momentum for business activity in the eurozone for June, according to a purchasing managers survey.
The European Central Bank has vowed to press on with interest rate increases in a bid to push inflation down. Thursday saw a wave of interest-rate hikes across the Atlantic, with the Bank of England and Norway’s central bank both hiking rates by 50 basis points with promises that more could come, along with hikes from Switzerland and Turkey as well.
Federal Reserve Chairman Jerome said Thursday that senior Fed officials largely expect the Fed to raise interest rates “a couple of times” later this year, though timing depends on data.
Jitters were showing up as the dollar
DXY,
rose 0.7% against a basket of major currencies — the euro
EURUSD,
fell 1% against the dollar — while the yield on the 10-year Treasury note
TMUBMUSD10Y,
fell five basis points to 3.744%. Yields on 10-year U.K. gilt
TMBMKGB-10Y,
and 10-year German bunds were down by 10 basis points or more. Crude prices
CL.1,
fell 1.6% to $68.49 a barrel.
However, U.S. Treasury Secretary Janet Yellen said recession risks have faded “because look at the resilience of the labor market, and inflation is coming down,” in an interview with Bloomberg that published Friday.
Neil Wilson, chief market analyst at Finalto, told clients in a note that Yellen is missing the point as the global economy is “entering a new phase.”
“Inflation is yesterday’s story – apart from in the U.K. – and we now enter the stagnation and recession phase. The risk regime is shifting from inflation to growth. That is not to say that inflation remains elevated – we are in a new inflationary paradigm, but don’t think central banks will throw every last basis point at getting core inflation down from 4% to 2%,” he said.
What central banks will have to accept is that higher inflation will become the new normal. “Whether mandates are adjusted may be a matter of taste. In the words of Mike Tyson, everyone has a plan until they get punched in the mouth,” Finalto said.
In the U.S. on Friday, the S&P flash U.S. services and manufacturing purchasing managers index for June are due at 9:45 a.m. Eastern. Cleveland Fed President Loretta Mester is expected to speak at 1:40 p.m.
Companies in focus
-
3M Co. shares
MMM,
-1.02%
rose 3% after the materials and chemicals company, and Dow Jones Industrial Average
DJIA,
-0.01%
component, offered $10.3 billion to settle claims it was responsible for so-called “forever chemicals” in drinking water. -
Virgin Galactic Holdings Inc.
SPCE,
-6.83%
dropped 15% in premarket trading after the space-tourism company said late Thursday in a filing it’s seeking to raise $400 million to scale up its business and improve its fleet.
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