Stock futures fell on Tuesday as Wall Street increasingly faced the possibility that the Federal Reserve will not cut interest rates anytime soon.
S&P 500 futures (^GSPC) fell 0.5%, while Dow Jones Industrial Average (^DJI) futures fell 0.4%. Technology-heavy Nasdaq 100 (^NDX) futures fell 0.5%. While the three major stock metrics started the week with wins, they are on track for a losing month.
Federal Reserve Board member Neel Kashkari said Monday that given the surprising resilience of the U.S. economy, the central bank will likely need to raise interest rates again and keep them high to cool inflation — echoing recent comments from other officials.
The prospect of higher interest rates for longer has weighed on markets, and the 10-year Treasury yield (^TNX) continued to hover at its highest levels since 2007 on Tuesday. This helped push the dollar to a new ten-month high.
As recession fears persist, JP Morgan CEO Jamie Dimon warned that markets may not be prepared for a worst-case scenario in which the Fed raises interest rates to 7% alongside stagflation.
Adding to the gloom was Moody’s warning that the government shutdown would hurt the US credit rating. With just days remaining before the September 30 deadline to reach a budget agreement, history shows the standoff could shake stocks.
Some relief may come from this week’s top economic data: Thursday’s update on second-quarter US GDP and Friday’s new reading on personal consumption expenditures inflation, the Fed’s preferred measure. Meanwhile, on Tuesday, investors will get new home sales data for August, and the S&P Case-Shiller home price index for July and September.
Stock futures slide as interest rates fall
Stocks were on the verge of a decline at Tuesday’s open on Wall Street as investors remained focused on how the Federal Reserve’s tightening campaign could play out during the final months of 2023.
S&P 500 futures (^GSPC) fell 0.39%, while Dow Jones Industrial Average (^DJI) futures fell 0.33%, or about 114 points. Futures on the tech-heavy Nasdaq 100 index fell 0.45%.
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