AP Photo/Richard Drew
- US futures fell Monday after stocks suffered their worst week since the March 2020 sell-off.
- The rout in crypto markets showed little sign of abating, with tokens deep in the red.
- Investors have dumped speculative assets as they brace for the Fed to hike rates in 2022.
US stock futures slid Monday following the worst week for the S&P 500 since March 2020, as investors fretted about interest rate hikes ahead of the Federal Reserve meeting this week.
S&P 500 futures were down 0.34%, Dow Jones futures were 0.25% lower, and futures for the tech-heavy Nasdaq 100 index fell 0.53%. Futures had risen in early European trading, but then abruptly changed course, as volatility continued to plague the market.
Expectations that the Federal Reserve will hike interest rates in 2022 as it tries to stamp down on inflation have rocked stocks so far this year.
Investors will be watching for a fresh steer from the Fed when it reveals its latest monetary policy decision Wednesday.
Traders expect the central bank to increase rates four times this year, starting with a 25 basis point increase in March. But some analysts believe policymakers could go harder and start with a 50 basis point increase, or make more hikes.
Goldman Sachs economists, led by Jan Hatzius, said the Fed may even hike rates at every meeting from March — seven increases in total.
Technology stocks have been particularly hard hit. Their full earnings potential lies far in the future, making them look less attractive as interest rates and bond yields rise.
Last week, bond yields shot higher, and the S&P 500 shed almost 6% in its worst five-day stretch since the pandemic-driven sell-off of March 2020.
Yet bond yields cooled Monday. The yield on the all-important 10-year US Treasury note dipped 2 basis points to 1.726%. Yields move inversely to price,
“With a number of critical market factors still in flux, the short-term market direction can remain volatile,” said Mark Haefele, CIO at UBS Global Wealth Management.
“But for longer-term investors, we don’t think it is a bad thing if market volatility takes some of the air out of the more speculative corners of the market,” he said.
“Nor is it a bad thing if current volatility means that some secular growth names are being offered at their best prices in months.”
Nerves over the chances of a Russian invasion of Ukraine were also weighing on appetite for risky assets, after the US State Department said Sunday it was pulling diplomats’ families out of the country.
Against the backdrop of escalating tensions, investors don’t appear to be keen to buy the dip, as they would usually do, according Michael Hewson, chief market analyst at CMC Markets.
“For several years, the markets have become accustomed to buying the dips no matter the fundamental backdrop,” Hewson said. “However, recent events appear to be seeing a significant loss of confidence in this mindset.”
European stocks fell, with the continent-wide Stoxx 600 index down 2.29%, and London’s FTSE 100 1.35% lower.
In Asia, China’s CSI 300 index closed 0.16% lower, but Hong Kong’s Hang Seng dropped 1.24%.
The rout in cryptocurrency markets showed little sign of abating. Bitcoin was down 5.3% at $33,894 on the Coinbase exchange, and other major tokens were deep in the red.
Ethereum’s ether fell 10% in the last 24 hours to $2,277 on Coinbase. Meanwhile, cardano was down 11%, and solana plunged 17%, according to prices on CoinMarketCap.
Earnings season is set to rumble on, with Apple, Boeing, Microsoft and Tesla due to release updates this week.
Elsewhere in markets, oil prices held steady at seven-year highs. WTI crude, the US benchmark, was down slightly to $84.98 a barrel, while Brent crude, the international benchmark, was also somewhat lower at $86.95 a barrel.
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