Wednesday April 6th


Stock futures fall for a second day as rates jump with the Fed set to tighten policy aggressively

U.S. Stock index futures dipped for a second day on Wednesday and rates soared to new heights as investors bet the Federal Reserve is about to aggressively tighten policy to fight inflation, and in turn slow the economy. Minutes from the Fed’s most-recent meeting are slated for release Wednesday afternoon. The minutes come from last month’s meeting when the central bank raised rates and indicated six more hikes were coming this year. Investors are bracing for new details about the Fed’s plan to reduce its balance sheet after comments from Fed officials knocked down stocks on Tuesday. Futures on the Dow Jones Industrial Average fell 220 points, or 0.65% on Wednesday. S&P 500 futures were down 0.9%, and Nasdaq-100 index futures shed 1.5%. All three major averages were headed for their second day of declines. The 10-year Treasury yield jumped above 2.65% on Wednesday, hitting a three-year high and continuing its rapid climb this week. The rate ended Monday at 2.40%. Fed Governor Lael Brainard in a speech on Tuesday indicated support for higher interest rates and said a “rapid” reduction of the central bank’s balance sheet could begin as soon as May. Following her remarks, the Dow pulled back by about 280 points and the Nasdaq Composite slid 2.3%. “It is of paramount importance to get inflation down,” Brainard said during a Minneapolis Fed webinar. Brainard has been nominated to be vice chair of the Federal Open Market Committee. San Francisco Fed President Mary Daly also shared concerns about inflation. “I understand that inflation is as harmful as not having a job,” Daly said. Tech shares led Tuesday’s losses and were set to fall again on Wednesday as investors rotated out of the group and braced for higher rates to slow the economy. Chipmakers suffered some of the biggest declines, with Nvidia and Marvell Technology falling more than 5% and 6%,  respectively. Both companies were set to continue their descent on Wednesday. Tesla, Microsoft, and Amazon shares were also slated to fall more than 2% on Wednesday and Twitter shed 3% premarket after rallying this week amid news that Elon Musk purchased a large stake in the company. As the Federal Reserve hikes rates investors have begun rotating into stocks with stable profits, shying away from those offering future growth. Investors continued to monitor the latest developments out of Europe, as the Ukraine-Russia war continues. The European Union and the U.S. are preparing to slap new sanctions on Russia after evidence emerged of war crimes allegedly committed by Russian forces. The new sanctions include a ban on Russian coal imports. Technology stocks in Asia-Pacific declined on Wednesday, mirroring losses seen among their peers on Wall Street following an overnight surge in the U.S. 10-year Treasury yield. The broader Asia-Pacific markets also declined on Wednesday. Hong Kong’s Hang Seng index dropped 1.87% on the day to 22,080.52. Mainland Chinese stocks closed mixed as they returned to trade following holidays earlier in the week. The Shanghai composite was marginally higher at 3,283.43 while the Shenzhen component shed 0.45% to 12,172.91. In Japan, the Nikkei 225 slipped 1.58% to close at 27,350.30 while the Topix index fell 1.34% to end its trading day at 1,922.91. South Korea’s Kospi dipped 0.88% to end the trading day at 2,735.03. Oil futures rose on Wednesday, paring early losses, as the threat of new sanctions on Russia raised supply concerns, countering fears of weaker demand following a build in U.S. crude stockpiles and Shanghai’s extended lockdown. Brent crude futures were up $1.07, or 1%, at $107.71 a barrel, having fallen to $105.06 earlier in the session. U.S. West Texas Intermediate futures climbed $1.21, or 1.2%, to $103.17 a barrel, after dipping to as low as $103.17 in early trade. Gold turned positive on Wednesday as risk-off sentiment gripped financial markets amid the possibility of more Western sanctions on Russia, although aggressive U.S. rate hike bets kept bullion near a one-week low. Spot gold rose 0.3% to $1,928.96 per ounce by 1005 GMT. U.S. gold futures were 0.3% higher at $1,932.40.