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U.S. stock index futures were slightly lower Wednesday, as investors continued to absorb hawkish comments from Federal Reserve officials and monitor the ongoing war in Ukraine with President Joe Biden set to arrive in Europe to discuss the crisis with allies.
How are stock-index futures trading?
-
S&P 500 futures
ES00,
-0.47%
fell 0.36% to 4,488 -
Dow Jones Industrial Average futures
YM00,
-0.38%
dropped 0.29% to 34,608 -
Nasdaq-100 futures
ES00,
-0.47%
fell 0.57% to 14,570
On Tuesday, the Dow industrials
DJIA,
climbed 254.47 points, or 0.7%, to close at 34,807.46, the S&P 500
SPX,
rose 1.1% to finish at 4,511.61, and the Nasdaq Composite
COMP,
advanced 2% to end at 14,108.82.
What’s driving the market?
A largely positive week for U.S. stocks thus far, showed signs of stalling on Wednesday, ahead of new-home sales data for February at 10 a.m. Eastern and fresh comments from Fed officials.
Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly backed up hawkish remarks at the start of the week from Fed Chairman Jerome Powell, who said the central bank could boost interest rates by more than a quarter percentage point if needed to rein in inflation.
Powell will speak on digital challenges at 8 a.m. Eastern Time at a BIS meeting, while Mester is due to speak to reporters at 10 a.m. Eastern and Daly will be speaking on the economy at 11:45 a.m. Eastern.
The yield on the 10-year Treasury note
TMUBMUSD10Y,
was slightly lower after hitting the highest levels since mid-2019. U.S. stocks have shrugged off the fresh spike in yields seen over the past two weeks, “suggesting that the Fed is still badly behind the curve if its intention is a significant tightening of financial conditions,” said the Saxo Bank strategy team in a note to clients.
“Some even suggest that the Fed’s rate hikes are unlikely to work very quickly on the economy as consumers have exited the pandemic with strong balance sheets and supply-side disruptions have little to do with the policy rate in any case,” said the analysts. So the Fed could be targeting a “negative wealth effect” bringing down demand and thereby prices for assets from housing to equities.
While the Fed may find it faster to do that with quantitative tightening, the central bank and the market may be “locked into a dangerous battle, with the Fed prepared to continue turning the screws until something ‘breaks,’” said the analysts.
Investors were also watching the war in Ukraine that is nearing the one-month mark, with Russian forces accused by Ukrainian leaders of seizing rescue workers and drivers from a humanitarian convoy headed to the besieged city of Mariupol.
President Biden is headed to Europe for four days to attend meetings of NATO, the G7 and the EU in Brussels and Warsaw this week and strategize on how to keep Russia’s Ukraine invasion from spiraling into an even larger crisis. He’s also expected to announce more sanctions to punish Russia, and ways to continue pressuring China from coming to that country’s aid.
“Supply chains from Asia to EU may come under further pressure as automakers and tech giants look to avoid rail routes through Russia and shift to sea routes, causing further congestion. Rising Covid cases in China and continued mass testing is also threatening shipping delays,” said the Saxo team.
As stock futures eased off, oil prices were pushing higher, with U.S.
CL00,
and Brent crude
BRN00,
rising more than 2% each to $115.56 and $117.88 a barrel, respectively.
