US stock futures dropped after a fresh batch of data showed persistent inflation, paving the path for the Federal Reserve to stay aggressive. Treasury yields rose.
(Bloomberg) — US stock futures dropped after a fresh batch of data showed persistent inflation, paving the path for the Federal Reserve to stay aggressive.
Treasury yields rose.
S&P 500 futures fell. Contracts on the tech-heavy Nasdaq 100 were down on Amazon.com Inc.’s plunge as its sales forecast trailed estimates. The benchmark 10-year Treasury yield rose to around 4.04% as hopes of a Fed pivot fizzled.
Data on Friday showed that a core gauge of US inflation accelerated in September, while consumer spending stayed resilient, bolstering the Fed’s case for another jumbo rate hike next week.
US employment costs also rose, another data point that’ll keep the central bank firmly on its path.
Economists are now expecting the Fed to raise rates by three-quarters of a percentage point for the fourth time in a row next week.
Tighter policy is already starting to crimp corporate earnings.
“The longer the Fed sticks to hiking based on old data and not allowing the effects of earlier hikes to kick in, the more risk we get of a hard landing,” Peter Tchir, head of macro strategy at Academy Securities, wrote in a note.
“I’m in the camp that the recession will be sooner and deeper than expected, but we can still get one more ‘everything rally’ before that gets priced in.”
Sentiment is also sour after lackluster earnings from big-tech firms including Alphabet Inc.
and Meta Platforms Inc. this week. While Apple Inc. delivered some good news in its quarterly report, it still warned of a holiday slowdown much like Amazon.com Inc.
“We are starting to see some companies’ bleeding in terms of forecasts and unfortunately we’re starting to see the big caps in the market disappointing,” Banque Syz CIO Charles-Henry Monchau said in an interview with Bloomberg TV.
“Earnings for us is still a headwind.”
Despite the downturn, the S&P 500 is heading for a second week of gains for the first time since August.
Beyond the US
The ECB delivered a second straight 75 basis-point hike on Thursday but dropped a prior reference to rate increases continuing for “several meetings,” an outcome that was considered dovish.
The central bank has a small margin for error after German inflation unexpectedly accelerated this month to 11.6% from a year earlier — far exceeding all estimates in a Bloomberg survey whose median forecast was 10.9%.
The Bank of Japan held its negative rate Friday, 10-year yield cap and asset purchases at the end of a two-day policy meeting, in line with the view of 49 economists surveyed by Bloomberg.
Chinese assets also remained in focus, with foreign investors dumping a record amount of mainland China stocks this week and sending Hong Kong equities to a 13-year low.
President Xi Jinping’s tightening grip on power hasn’t had the same impact domestically, with mainland investors hunting for bargains in Hong Kong.
Some of the main moves in markets:
Stocks
- Futures on the S&P 500 fell 0.5% as of 8:55 a.m.
New York time
- Futures on the Nasdaq 100 fell 0.9%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro was little changed at $0.9956
- The British pound fell 0.3% to $1.1531
- The Japanese yen fell 1% to 147.80 per dollar
Cryptocurrencies
- Bitcoin fell 1% to $20,187.67
- Ether fell 1.3% to $1,508.68
Bonds
- The yield on 10-year Treasuries advanced 12 basis points to 4.04%
- Germany’s 10-year yield advanced 20 basis points to 2.16%
- Britain’s 10-year yield advanced 10 basis points to 3.50%
Commodities
- West Texas Intermediate crude fell 0.9% to $88.32 a barrel
- Gold futures fell 1% to $1,649.40 an ounce
–With assistance from Michael Msika, Kurt Schussler, Allegra Catelli, Cecile Gutscher, Brett Miller and Reade Pickert.
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