Stock Futures Fall for a Second Day as Rates Jump With the Fed Set to Tighten Policy Aggressively

Stock 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. This was the meeting last month where the central bank raised rates and indicated six more hikes were coming this year. Investors are bracing for new details in the minutes 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 190 points, or 0.57% on Wednesday. S&P 500 futures were down 0.8%, and Nasdaq-100 index futures shed 1.34%. All three major averages were headed for their second day of declines.

The 10-year Treasury yield jumped above 2.65% on Wednesday a three-year high and continuing a rapid move 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 the market’s losses on Tuesday and were set to fall again on Wednesday as investors rotated out of the group as they brace for higher rates to slow the economy. Tesla and Nvidia shares were set to fall more than 2%.

Investors also kept an eye on 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.

Crude prices, which have surged since the war began, rose again on Wednesday. U.S. oil prices were up by 1.3% at $103.30 per barrel, while international benchmark Brent gained about 1%% to trade at $107.66 per barrel.

Source: CNBC