Wednesday September 7th


Stock futures fall, Nasdaq heads for 8th negative session on fears the Fed will keep raising rates aggressively

U.S. stock markets index futures fell Wednesday as investors worry that the Federal Reserve will hand out another large rate hike in September in a bid to tame high inflation. Futures tied to the Dow Jones Industrial Average slipped 65 points, giving up earlier gains. S&P 500 futures also retreated, edging lower by 0.19%, and Nasdaq 100 futures were down 0.05%. If the slide continues into the trading day, it could be the eighth negative session in a row for the Nasdaq Composite. Stock futures dipped into negative territory after a Wall Street Journal article suggested that Federal Reserve Chairman Jerome Powell’s commitment to reduce inflation could mean that the central bank hikes rates by 0.75 percentage point in September, which would be the third consecutive increase of that size. Markets have been hoping that the Fed would start to hand out smaller increases starting in September, but are now pricing in an 86% chance of a 0.75 percentage point hike. Stocks added to their three-week slide Tuesday. The Dow fell about 173 points, or 0.5%, and the S&P 500 slid 0.4%. The Nasdaq Composite dropped 0.7% to notch its first seven-day losing streak since 2016. The moves came amid a surge in bond yields that saw the 10-year U.S. Treasury yield jump to its highest level since June. The rate on the 30-year Treasury closed at its highest level since 2014. Bond yields move inversely to prices. Rates dipped slightly Wednesday, with the 10-year trading at 3.321%. The 2-year and 30-year yields traded at 3.47% and 3.472%, respectively. Investors are split on how to approach the market entering the first post-Labor Day week in September, a notoriously cruel month for stocks. All eyes are on the 3,900 level on the S&P 500. Some see the index falling to even lower lows, while others are optimistic about a year-end rally. “With equities back to June lows and the rates path reset higher, more inflation easing along with decisive EU government intervention to tackle the energy crisis could prompt another bear squeeze,” Emmanuel Cau of Barclays wrote in a Wednesday note. “Big picture, we think stocks remain in a tough spot given a poor growth-policy trade-off.” On Wednesday, the Federal Reserve will give its summary on current economic conditions, also known as the Beige Book. Elsewhere, Fed presidents Loretta Mester of Cleveland and Tom Barkin of Richmond, as well as Fed Vice Chair Lael Brainard are scheduled to speak at various events. Markets in Asia-Pacific fell on Wednesday as investors anticipate the Federal Reserve to give its summary on current economic conditions, also known as the Beige Book. China’s exports grew 7.1% in August from a year earlier, missing estimates of 12.8% forecasted in a Reuters poll, after growing 18% in July. The offshore Chinese yuan weakened further to 6.99. The Nikkei 225 in Japan closed lower at 27,430.3 and the Topix at 1,915.65. In mainland China, the Shanghai Composite pared earlier losses to trade slightly higher and the Shenzhen Component was up 0.41%. In South Korea, the Kospi closed lower at 2,376.46 and the S&P/ASX 200 in Australia was 1.42% lower at 6,729.3. The Hang Seng index was 0.93% lower in the final hour of trade and the Hang Seng Tech Index was down 1.29%. Oil prices were little changed on Wednesday on threats that Russia will walk away from its energy supply contracts, reversing losses from earlier in the session when prices fell to their lowest since Russia invaded Ukraine. Brent crude futures declined 11 cents to $92.72 a barrel, having earlier hit their lowest since Feb. 18 at $91.20. U.S. West Texas Intermediate crude futures shed 16 cents to trade at $86.72 per barrel. The benchmark had earlier fallen to a session low of $85.08, the weakest since Jan. 26. Gold prices edged up on Wednesday, as a rally in U.S bond yields paused, but gains were limited by sustained strength in the dollar and impending aggressive monetary policy decisions. Spot gold was up 0.2% to $1,704.60 per ounce at 09:47 GMT, having dropped to its lowest since Sept. 1 at $1,690.10. U.S. gold futures gained 0.2% to $1,716.80.