Stocks fell on Monday, continuing last week’s declines on fears about inflation and whether the Federal Reserve’s policy to control it will trigger a recession.
futures for him
Dow Jones Industrial Average
it fell 600 points, or 1.9%, after the index lost 880 points on Friday to close at 31,392.
futures signaled a 2.4% start in the red with tech stocks heavy
about to fall 3%; the S&P 500 and the Nasdaq fell 2.9% and 3.5% on Friday, respectively.
Overseas, the pan-European Stoxx 600 fell 1.8% and the Tokyo
finished 3% lower.
Monday’s drop follows a deep selloff on Friday, catalyzed by US consumer price index (CPI) inflation data showing prices rose more than expected in May. With inflation at a multi-decade high, and showing little sign of peaking, the Federal Reserve is exerting pressure to move aggressively to tighten monetary policy.
“Markets have embarked on another rough ride on inflation fears,” said Steve Clayton, fund manager at
“Investors are now concerned that the economic data will force the US Federal Reserve to raise interest rates, faster and faster than previously anticipated.”
Bond yields increased. The 2-year US Treasury note, which attempts to forecast the Fed’s benchmark rate in a couple of years, moved as close to 2.94% on Friday, the highest intraday level since late 2008. The yield on that bond soared above 3.22% on Monday, the highest since 2007, while the yield on the 10-year US Treasury jumped to 3.24%.
The 2-year return was as high as 2,937% today. This is the highest intraday level since November 9, 2018.
The 2-year Treasury yield, which attempts to forecast the level of the fed funds rate a couple of years from now, jumped from 2.85% to just over 3% minutes before the inflation result hit the cables. The 2-year bond yield is now at a multi-year high.
The Fed is trying to fight inflation by raising interest rates and reducing its bond holdings. Having raised rates twice this year, the Fed is expected to do so again this week after its monetary policy committee meets on Wednesday. The macro risk for markets is whether the Fed can engineer a “soft landing”: lowering inflation by reducing economic demand without causing a recession.
Ahead of its meeting this week, investors are considering whether the Fed will raise rates by 50 basis points this week (most hikes are 25 basis points, which is a quarter of a percentage point) or head for a huge 75 basis points. point hike
“In the wake of another shocking US CPI data on Friday, shouldn’t a 75 basis point increase be a serious consideration?” said Jim Reid, a strategist at Deutsche Bank. “Without recent guidance from the Fed, 75 basis points would be firmly on the table for Wednesday. This is highly unlikely this week, but our economists believe they could get out of their own guidance and leave the door open at 75 basis points in July.”
Bitcoin and other cryptocurrencies were in the red. Bitcoin, the largest digital asset, fell 11% in the last 24 hours to below $24,400, the lowest levels since the end of 2020.
Cryptocurrencies have been largely shown to be correlated with the stock market, so the recent sell-off in stocks puts downward pressure on Bitcoin and its peers. The pain in digital assets was exacerbated by crypto lending platform Celsius Network stopping withdrawing crypto deposits from its platform.
Email Jack Denton at firstname.lastname@example.org