U.S. stock futures edged down, putting major indexes on track to extend losses after one of Wall Street’s worst selloffs since the pandemic began.
Futures tied to the Dow Jones Industrial Average shed 0.3%, a day after the blue-chip index slumped more than 1,000 points, its worst day since 2020. S&P 500 futures edged down 0.5% while technology-heavy Nasdaq-100 futures were down 0.6%.
Stocks have been whipsawed in recent days as investors have tried to gauge what impact the Federal Reserve’s plan to raise interest rates will have on the economy. Investors are caught between competing hopes: that rate increases will be significant enough to tame rapidly rising inflation, but not so large that they will derail economic growth.
“The market is trying to balance whether central banks are more worried about inflation or about dampening growth and the market has clearly decided they are more worried about inflation,” said Altaf Kassam, head of investment strategy for Europe, the Middle East and Africa at State Street Global Advisors. “If the Fed is going to be fighting inflation at all costs then it will certainly have an impact on stocks.”
U.S. stocks rallied Wednesday after the Federal Reserve raised interest rates by half a percentage point, buoyed by relief that it wasn’t actively considering even larger increases in the future, but that relief faded Thursday as investors reassessed the outlook for stocks.
Valuations for U.S. markets have “moved from rich to very rich” in the past 10 years as stock prices have risen more than earnings, said
Frank Benzimra,
head of Asia equity strategy at Société Générale. But as interest rates climb, the value that investors place on companies’ future cash flows is decreasing, he said.
In bond markets, the yield on the benchmark 10-year U.S. Treasury note rose to 3.074% from 3.066% on Thursday, which marked its highest level since November 2018. Bond yields rise as prices fall.
One reason for the volatile swings in markets: Investors lack an obvious haven as bonds and gold have come under pressure from rising interest rates.
“To cope with this volatility you need a buffer but fixed income is not the buffer that it used to be,” said Mr. Kassam.
Brent crude, the global oil benchmark, rose 1.6% to $112.70 a barrel, extending a recent run of gains driven by expectations that the European Union was set to ban imports of Russia’s oil in response to its invasion of Ukraine. Gold prices edged up 0.2%
Bitcoin fell 0.8% to $36,152, after slumping more than 8% Thursday as the market selloff prompted investors to exit risky bets such as cryptocurrencies.
Investors were awaiting data on the state of the jobs market, a strong point for the U.S. economy with the unemployment rate close to a 50-year low. That has also driven wages higher adding to building inflationary pressures. The April jobs report, due at 8:30 a.m. ET, is expected to show another strong month for job gains.
Japanese stocks bucked the broader downtrend as the Tokyo market reopened after three days of holidays.
Photo:
kazuhiro nogi/Agence France-Presse/Getty Images
Overseas, benchmark indexes in both Asia and Europe retreated, tracking losses in the U.S., with declines most pronounced for the tech-heavy Hang Seng Index, which slumped 3.8%. In mainland China, the Shanghai Composite Index fell 2.2%. In Europe, the pan-continental Stoxx Europe 600 fell 1.2%.
Japanese stocks bucked the broader downtrend as the Tokyo market reopened after three days of holidays, with the Nikkei 225 gaining 0.7%.
Write to Rebecca Feng at rebecca.feng@wsj.com and Will Horner at William.Horner@wsj.com
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