Dow Futures Fall, Yields Rise, Bitcoin Slumps—and What Else Is Happening in the Stock Market Today

Stock futures fell Monday after a hawkish message from Federal Reserve Chairman Jerome Powell.


Timothy A. Clary/AFP via Getty Images

Stock futures pointed to extended losses for Wall Street Monday after Federal Reserve Chairman Jerome Powell said the central bank “must keep at it” until it wins the battle against rising inflation.

What that means, Powell said, is that the Fed will keep moving aggressively to raise interest rates until it returns inflation to its target of 2%.

In a speech less than 10 minutes long at the annual Jackson Hole Economic Symposium on Friday, Powell said returning the economy to price stability will take “some time” and will require bringing “some pain to households and businesses,” which he called the “unfortunate costs of reducing inflation.”

Stock markets fell sharply Friday with the


Dow Jones Industrial Average

tumbling 1,000 points and the


S&P 500

declining 3.4% — its biggest drop since June — after Powell’s hawkish message.

Futures contracts linked to the Dow on Monday were down 274 points, or 0.9%, to 31,992, S&P 500 futures fell 0.9%, and


Nasdaq

futures tumbled 1.1%. 

Cliff Hodge, chief investment officer at Cornerstone Wealth, said the Federal Reserve’s stance “drastically reduces the chance of a soft landing and the bull case for new highs this year.” Hodge also said it raises the odds of recession next year.

Bond yields, particularly the shorter end of the yield curve, rose Monday. The two-year yield hit 3.46%, pushing it higher than than the 10-year Treasury, which was at 3.12%.

Powell offered few hints on the size of the interest rate hike the Fed will announce at its policy meeting in September, saying only that the central bank’s next rate decision “will depend on the totality of the incoming data and the evolving outlook,” he said.

He did add, however, that as “the stance of monetary policy tightens further, it will likely become appropriate to slow the pace of increases.”

The Fed has raised rates by three-quarters of a point at its last two meetings. According to the CME FedWatch Tool, as of Monday investors expect a 68.5% chance of a 0.75-point hike at the Fed’s policy meeting on Sept. 20-21, and a 31.5% chance of a half-point hike.

“Investors are coming to terms with the idea that the Fed is serious about curbing inflation, even as recent data suggest inflation is starting to decline,” said Rod von Lipsey, managing director at UBS Private Wealth Management.

He added that  economic data justifies a rate hike of 50 or 75 basis points at the Fed’s meeting next month, “with the potential for additional 25 or 50-basis-point rate hikes at the November and December meetings to stay ahead of inflationary trends.”

Elsewhere,


Bitcoin

 traded below $20,000 for the first time in more than a month as Powell’s hawkish speech weighed on cryptocurrencies. At last check, the world’s largest cryptocurrency was at $19,812, down 0.8% over the past 24 hours.

Here are some stocks on the move Monday:



Apple

(ticker: AAPL) was down 1.3% in premarket trading Monday after tumbling 3.8% on Friday. A report from Politico said Justice Department lawyers were in the early stages of drafting a potential antitrust complaint against the iPhone maker.



Meta Platforms

(META) fell 1.2%. The Wall Street Journal reported that the parent company of Facebook has agreed to settle a lawsuit that accused the social-media giant of allowing third parties, including Cambridge Analytica, to access private user data. 



Dow Inc.

(DOW) declined 2.5% after analysts at KeyBanc downgraded the stock to Underweight from Sector Weight, saying they see “short-term risk/reward for names with meaningful commodity and European exposure skewed to the downside.”

Write to Joe Woelfel at joseph.woelfel@barrons.com

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