Stocks were beginning to rally on Tuesday, after a Monday sell-off linked to inflation fears and recession risks rattled markets and pushed the S&P 500 Index into a bear market.
futures for him
Dow Jones Industrial Average
it rose 50 points, or 0.2%, after the index fell 876 points on Monday to close at 30,516.
futures signaled a 0.3% higher start, with tech stocks weighing
about to rise 0.6%; the S&P 500 plunged 3.9% on Monday and the Nasdaq plunged 4.7%. US futures were previously higher before trading, with the S&P on track to open 1% higher.
Abroad, the pan-European
fell 1% and that of Tokyo
it lost 1.3% to follow Wall Street lower from Monday.
Monday’s selloff saw the Dow post its third straight drop of 500 points or more for the first time on record, while the S&P headed into bear market territory, defined as falling more than 20% from recent highs. Even the implied rally in stock index futures the next day would keep the S&P 500 in that zone.
Behind the erosion in investor sentiment is recession risk amid signs of persistent inflation, which is at a multi-decade high. Central banks, including the Federal Reserve, are expected to fight inflation with more aggressive monetary policy, including multiple interest rate hikes. The concern is that the Fed cannot engineer a “soft landing”: cooling inflation without causing a recession.
“The US market entered bearish territory last night, with its major markets falling to long-forgotten lows. The crux of the concern plaguing investors is how harshly the Fed plans to tackle rising inflation,” said Sophie Lund-Yates, an analyst at broker Hargreaves Lansdown. “Getting the balance wrong and raising interest rates too aggressively could make recession fears come true.”
Having raised rates twice this year, the Fed’s monetary policy committee begins meeting today and will announce its next move on Wednesday.
After higher-than-expected US consumer price index (CPI) data last Friday, bets have been raised that the Fed will hike 75 basis points. Most of the increases are 25 basis points, which is a quarter of a percentage point. The Fed last raised rates by 50 basis points last month, and has since indicated they are unlikely to rise further, though the latest data could put pressure on that guidance.
Another inflation-related data release comes before that announcement: the producer price index (PPI) for May. “Today’s US PPI will be closely watched for the next inflationary push,” said Jim Reid, strategist at
The PPI measures the change in prices from the perspective of sellers and is expected to have fallen to 10.9% yoy in May.
The PPI “has started to show signs of slowing down and is much more of a leading indicator than the CPI, which tends to be more backward looking,” said Michael Hewson, an analyst at the broker.
“In April we fell to 11% from 11.5% in March, and we could fall further when May figures are released later.”
A higher-than-expected PPI number could reinforce that inflation has yet to peak and trigger further stock selling. The opposite, a figure lower than expected, could support that the worst of the price increase is over and encourage investor confidence.
Bond yields, which rose in recent days to multi-year highs amid expectations of higher inflation and more Fed rate hikes, have eased slightly. The yield on the benchmark 10-year US Treasury note hovered around 3.3% after topping 3.4% on Monday. The yield on the 2-year note, which attempts to forecast the Fed’s benchmark rate a couple of years from now, was 3.29% after similarly rising above 3.4% on Monday.
As stocks rose
and other cryptocurrencies remained under pressure. The largest digital asset is down 7% in the past 24 hours to below $22,500, having traded around $30,000 as recently as the end of last week.
Here are three stocks in motion on Tuesday:
(ticker: AF.France) fell 10% in Paris trading, even after completing what it said was a successful 2.26 billion euro ($2.4 billion) rights issue.
After closing at an all-time low on Monday following an 11% drop,
(COIN) was down another 4% in the US pre-market on Tuesday. The cryptocurrency exchange, as well as other companies exposed to digital assets, have suffered a brutal liquidation. software group
(MSTR), which has a significant amount of Bitcoin on its balance sheet, fell 25% on Tuesday and was down another 5% before trading.
Email Jack Denton at email@example.com