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,
-0.89%
dropped 26.25 points, or 0.7%, to 3864. -
Futures on the Nasdaq 100
NQ00,
-1.01%
decreased 98.5 points, or 0.8%, to 11835.
On Friday, the Dow Jones Industrial Average
DJIA,
fell 139 points, or 0.45%, to 30822, the S&P 500
SPX,
declined 28 points, or 0.72%, to 3873, and the Nasdaq Composite
COMP,
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,
trading below $19,000. Gold futures also fell, with the lead contract
GC00,
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.
