Dow futures collapse nearly 600 points on second day of selling after inflation shock

US stock futures appeared to slip below May lows as financial markets continued to be impacted by a surprise acceleration in inflation just days ahead of a US Federal Reserve interest rate decision.

  • Futures on the Dow Jones Industrial Average YM00,
    fell 597 points, or 1.9%, to 30762.

  • futures on the S&P 500 ES00,
    fell 92.75 points, or 2.4%, to 3808.

  • futures on the Nasdaq 100 NQ00,
    down 350.5 points or 3% to 11517.

On Friday, the Dow Jones Industrial Average DJIA,
down 880 points or 2.73% to 31393, the S&P 500 SPX,
down 117 points or 2.91% to 3901 and the Nasdaq Composite COMP,
fell 414 points or 3.52% to 11340.

The S&P 500 closed just above the May close of 3900.79 on Friday. The Dow and Nasdaq are also at risk of falling below the May lows.

What moves the market

Friday’s news showing CPI shooting to a fresh 40-year high of 8.6%y/y has prompted investors to reassess how much the Fed will hike rates.

Amid speculation that the Fed could hike rates by as much as 75 basis points on Wednesday, the yield on 2-year Treasury bond TMUBMUSD02Y rose,
is up 3.20% from 2.80% on Thursday.

“Sentiment has shifted dramatically as market participants have realized that because of Russian tactics in Ukraine, we have a galloping food crisis, China could very well be in and out of lockdowns for months, which could lead to global supply shocks, and is a recession very likely now as the only option to dampen demand and inflation,” said Peter Garnry, head of equity strategy at Saxo Bank.

Tightening isn’t limited to the US Last week, the European Central Bank suggested that a quarter-point rate hike in July could be followed by a 50 basis-point move in September as the Bank of England also prepares for another rate hike this week.

The impact has been strong in cryptocurrencies, with Bitcoin BTCUSD,
extends its weekend plunge to trade below $25,000. Crypto lending platform Celsius Network has suspended withdrawals and transfers.

“Celsius’ unprecedented move effectively blocks clients from accessing their assets, which will do little to allay critics’ fears that some DeFi platforms may be Ponzi schemes,” said Nigel Green, chief executive of financial advisor deVere Group . Dow futures collapse nearly 600 points on second day of selling after inflation shock

Brian Lowry

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