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The S&P 500 and the Nasdaq logged their worst weekly percentage drop since June on Friday as markets fully priced in at least a 75-basis-point rise in rates during the week, with Fed funds futures showing a 21% chance of a whopping 100 bps increase.
Unexpectedly hot August inflation data last week also raised bets on increased rate hikes down the road, with the terminal rate for U.S. fed funds now at 4.46%.
Heavyweights Microsoft Corp (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), Meta Platforms, Alphabet (NASDAQ:GOOGL) Inc, Apple Inc (NASDAQ:AAPL), Tesla (NASDAQ:TSLA) Inc and Nvidia (NASDAQ:NVDA) Corp fell between 1.0% and 1.4% in premarket trading.
Bank of America (NYSE:BAC) slipped 1.4% to lead declines among the big U.S. banks.
Focus will also be on new economic projections, due to be published alongside the policy statement at 2 p.m. ET (1800 GMT) on Wednesday.
Goldman Sachs (NYSE:GS) cut its forecast for 2023 U.S. GDP late on Friday as it projects a more aggressive Fed and sees that pushing the jobless rate higher than it previously projected.
Worries of Fed tightening have already contributed to a 18.7% decline in the S&P 500 this year, with a recent dire earnings report from delivery firm FedEx (NYSE:FDX), an inverted U.S. Treasury yield curve and warnings from the World Bank and the IMF about an impending global economic slowdown adding to woes.
The CBOE volatility index, also known as Wall Street’s fear gauge, rose to 27.90 points, inching closer to a more than two-month high.
At 6:26 a.m. ET, Dow e-minis were down 285 points, or 0.92%, S&P 500 e-minis were down 37.75 points, or 0.97%, and Nasdaq 100 e-minis were down 121.75 points, or 1.02%.
