Wall Street Stock Futures Slide After Worst Week in Four Months

Wall Street Stock Futures Slide After Worst Week in Four Months

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Key Takeaways

• Dow slides as much as 250 points at its lowest pre-market level ahead of the opening
• Friday’s losses brought the Dow to its worst week since the week ended Oct. 30

Stock futures on Wall Street declined in pre-market trading on Monday. Futures contracts tied to the Dow Jones Industrial Average at one point slid more than 250 points, or roughly 0.80%, as a continuation of last week’s slide. S&P500 futures and Nasdaq futures also traded lower before the opening bell in New York.

US stocks ended last week sharply in the red, posting their worst week since October. The risky assets were knocked from their near-record levels immediately after the Federal Reserve released their revised economic projections, which included higher inflation expectations for the year alongside an interest rate hike earlier than planned.

Stocks remained pressured on Friday and extended their losses further on comments by Fed officials that the US central bank may perform the first interest rate increase in late 2022. The news prompted the Dow Jones to fall 1.58% or 533.37 points, to 33,290.08. Friday’s decline in the blue-chip index pushed it lower by 3.45% for the week.

The S&P500 tumbled 1.31%, or 55.41 points, to 4,166.45 on Friday, losing 1.9% on the week. The negative performance in the broad-based index snapped a three-week winning streak. The Nasdaq Composite dropped 0.92%, or 130.97 points, to finish Friday’s trading at 14,030.38. The tech index was hovering above the flatline for the week but the ultimately ended up negative by 0.2% on a weekly basis as tech stocks couldn’t sustain the upside momentum.

Hawkish Tone to Fight Inflation Risks

The Federal Reserve on Wednesday roiled the financial markets with its new outlook on monetary policies. The central bank decided to raise inflation expectations for the year to 3.4%, up from a 2.4% forecast in March. Moreover, Federal Reserve Chairman Jerome Powell said the majority of Fed policymakers expected to see higher interest rates one year earlier than planned, in 2023.

Sentiment waned further after St. Louis Fed President Jim Bullard said Friday on CNBC the interest rate could be lifted as early as 2022. The estimate is even quicker than the broader expectation by the Federal Open Market Committee that caused the initial hit to the financial markets last week.

The significantly more hawkish tone by the Fed, according to Mr. Bullard, is needed in order to tackle the higher-than-expected rate of inflation. “This is a bigger year than we were expecting, more inflation than we were expecting,” said the Fed policymaker. “I think it’s natural that we’ve tilted a little bit more hawkish here to contain inflationary pressures.” While 13 of 18 Fed officials expected a rate increase in 2023, 7 of 18 of the FOMC members predicted a rate hike next year.

Now that the markets are pricing in the forthcoming interest rate increase, the Federal Reserve would need to be nimble toward its other monetary policy dynamic, asset purchases.

Central bank officials have already started “talking about talking about” tapering the $120bn-a-month asset purchase program. According to Fed Chair Jerome Powell, several months of discussion are needed before the central bank decides how to begin reducing the current pace.