Stock Futures Fall on Inflation Data

Stock Futures Fall on Inflation Data

Stock futures gave up their gains Wednesday after fresh data showed inflation eased slightly in April.

Futures for the S&P 500 slipped 0.6%, reversing a gain of more than 1% ahead of the release of the data. The index snapped a three-day losing streak Tuesday, hitting pause on a stretch of pressure that came as investors braced for the Federal Reserve to keep raising interest rates to curb decades-high inflation.

Futures for the Dow Jones Industrial Average dropped 0.4% on Wednesday and futures for the technology-focused Nasdaq-100 declined 1.1%.

The yield on 10-year Treasury notes—which underpins borrowing costs throughout the economy—rose to 3.032% from 2.990%. Yields and bond prices move in opposite directions.

The consumer-price index rose 8.3% in April from the same month a year ago, decelerating from an 8.5% annual rate in March but above the 8.1% expected by economists. Lower annual inflation last month marks the first monthly easing of price increases since August 2021.

The trajectory of inflation and wages will determine how much the Fed will raise interest rates at its next policy meeting. The central bank last week lifted rates by half a percentage point, the biggest rise since 2000, and approved a plan to shrink its $9 trillion asset portfolio—kicking into a higher gear its campaign to rein in 40-year-high inflation.

Stocks, particularly in the US, have been hit by a wave of selling in recent weeks. Investors are contending with the unwind of easy monetary policies that had boosted gains for stocks and bonds since the early days of the pandemic.

Ahead of the bell in New York, shares of Coinbase Global slide 15% after the cryptocurrency exchange said its users declined from the previous quarter. Shares of Unity Software plunged 23% premarket after the videogaming software developer widened its loss and gave second-quarter revenue guidance below analysts’ expectations.

Switch rose 8.9% after the computer-services company said it was being taken private by a consortium of investors.

Traders worked on the floor of the New York Stock Exchange on Tuesday.


Photo:

BRENDAN MCDERMID/REUTERS

Adding to the uncertainty for investors are the war in Ukraine, which has propelled inflation even higher by boosting commodity prices, and Covid-19 lockdowns in China that threaten to hurt the global economy.

“If we only had rising policy rates, or only had high inflation, or only had China or only had Ukraine, we could probably manage that,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “But we’ve got all that simultaneously. That’s why it’s such a particularly challenging environment.”

Mr. Morris said US stocks could come under further pressure, saying valuations were down to average levels having been historically expensive before the selloff.

Oil prices edged higher. Brent crude, the global benchmark, rose 3.5% to $106.02 a barrel.

Overseas markets were broadly higher. The Stoxx Europe 600 gained 0.7%, led by shares of auto and real-estate companies. In Asia, Hong Kong’s Hang Seng gained 1% and the Shanghai Composite Index added 0.8%.

Among individual European stocks, Swedish Match gained about 9% after saying its board had agreed to a takeover by Philip Morris International,

valued at the equivalent of $16 billion. German industrial company Thyssenkrupp rose 12% after saying higher steel prices would buoy earnings for the rest of the year.

Write to Joe Wallace at joe.wallace@wsj.com

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