US stock futures have fallen and government bond sales have stabilized after the latest sign that the Federal Reserve will aggressively tighten monetary policy to fight inflation.
Futures for the S&P 500 fell 0.2% on Friday, while those for the technological Nasdaq-100 remained unchanged. Dow Jones Industrial Average contracts fell 0.3%. On Thursday, major US stock indexes ended in losses.
The sharp rise in government bond yields shows signs of stabilizing, with 10-year government securities yields rising to 2.918% in recent trading, their highest level since December 2018 and rising slightly from 2.917% on Thursday. Earlier on Friday, yields made a sharp climb before reversing the course as the session continued. Yields rise when bond prices fall.
On Thursday, Fed Chairman Jerome Powell gave investors a clear signal that the central bank will accelerate the pace at which it tightens monetary policy. He said he was likely to raise interest rates by half a percentage point at his meeting in May. The interest rate hike next month, following the Fed’s quarterly increase in March, will be the first time since 2006 that the central bank raised its interest rate in successive meetings.
Mr Powell’s comments injected new volatility into the fragile stock market, which was shattered this year by the war in Ukraine, rising inflation and rising Covid-19 cases in China. Many traders are now worried that the Fed’s tightening cycle could drive the economy into recession at a time when consumers are already feeling uneasy about the economy. Next week, investors will analyze new data from the University of Michigan on consumer sentiment in April.
On Friday, data from the National Statistics Office in the United Kingdom showed signs of consumer nervousness. Retail sales in the UK fell sharply last month, falling 1.4%. This led to a fall of the British pound by 1% against the dollar to its lowest level since 2020. The London Stock Exchange FTSE 100 fell 0.9%.
“I think what you’re seeing is that consumers are getting much more hesitant,” said Susanna Streetter, a senior investment and market analyst at Hargreaves Lansdown. “This is a complex rope that central bank politicians need to step on right now. They need to put a lid on this boiling pot of inflation, but they don’t want the steam to be completely expelled from the economy. “
However, for now, investors are encouraged by the strong profits for the first quarter. Of the companies that have reported so far, nearly 80% have exceeded analysts’ expectations. This helped ensure some stability in the US stock market. Even with Thursday’s losses, the Dow Jones Industrial Average is currently at a pace to end the week with a 1% gain.
Shares on Wall Street fell on Thursday after Federal Reserve Chairman Jerome Powell signaled that the central bank would raise interest rates by half a percentage point at its next meeting.
Photo: Courtney Crow / Associated Press
Shares of airlines rose in pre-market trading in New York. United Airlines Holdings added 2% and American Airlines Group won 0.9%. On Thursday, American said its sales reached a record high in March, the first month since the pandemic began, in which the airline’s total revenue exceeded 2019 levels.
Shares of American Express fell 1.6% on the preliminary market after the credit card company recorded net income of $ 2.10 billion for the first quarter, a decline of $ 2.24 billion a year earlier, even when expenses for travel and entertainment increased.
Kimberly-Clark won a 3.9% pre-market after diaper maker Huggies and toilet paper maker Cottonelle raised its targets for the full year and said first-quarter sales were up from the previous year.
Shares of HCA Healthcare fell 11% after the chain of hospitals lowered its guidelines for the year. The company said that the volume and revenues for the first quarter were offset by higher-than-expected inflationary pressures on labor costs.
In raw materials, crude Brent, the international benchmark for oil, fell 1.3 percent to $ 106.61 a barrel.
In the foreign exchange markets, the ICE US Dollar index, which tracks the currency against a basket of others, rose 0.4%, gaining the week’s profit. Including Friday, the index rose for all but two sessions in April, thanks to geopolitical concerns and the impending rise in interest rates from the Fed.
In overseas markets, the Pan-Continental Stoxx Europe 600 fell 1.4 percent, dragged by technology companies, including German software companies SAP and TeamViewer, both by about 5 percent. In contrast, Swiss cement maker Holcim rose 4% after the company saw sales growth and improved its outlook for the year.
In Asia, Hong Kong’s Hang Seng lost 0.2 percent and Japan’s Nikkei 225 fell 1.6 percent. Shanghai Composite, by contrast, reversed the trend, rising 0.2%.
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
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