Thursday July 14th


Dow futures fall more than 400 points as traders weigh potential for big rate hikes

U.S. stock index futures fell Thursday as big bank earnings season commenced and traders assessed the possibility of even tighter U.S. monetary policy on the back of June’s hot inflation report. Dow Jones Industrial Average futures shed 454 points, or 1.48%. S&P 500 futures were 1.29% lower, and Nasdaq 100 futures lost 0.89%. Futures added to their losses after JPMorgan Chase reported quarterly earnings that missed analyst expectations. The stock fell more than 4% in premarket trading. Morgan Stanley is also set to report Thursday. The consumer price index rose 9.1% on the year in June, higher than a Dow Jones estimate for an 8.8% year-over-year increase. Core CPI, which excludes volatile prices of food and energy, was 5.9%, also ahead of a 5.7% estimate. In addition, the Beige Book, released Wednesday by the Fed showed worries of an upcoming recession amid high inflation. The CPI report also impacted treasuries, sending the 2-year Treasury yield up nine basis points to about 3.138% while the yield on the 10-year Treasury fell about 4 basis points to 2.919. An inversion of the two is a popular signal of a recession. The report also opened the door for a big Federal Reserve rate increase later this month, with the Fed funds futures market now pricing in a hike of as much as 1% — or 100 basis points. “The takeaway for investors is that Fed policy remains data-dependent and the central bank will continue on an aggressive tightening path until inflationary pressures peak decisively,” strategists at BCA Research wrote in a note. “Persistent price pressures call for another jumbo hike at the July 26-27 FOMC, but there is still room for the data to improve before the September meeting, 8 weeks later.” Weekly jobless claims and the June producer price index report, which measures prices paid to producers of goods and services, will also be released Thursday. Both reports will give further insight into the economy. Hong Kong stocks briefly slipped more than 1% while Asia-Pacific markets traded higher on Thursday. The moves came as Singapore tightened monetary policy and Australia announced that its unemployment rate has fallen. The Hang Seng index was down 0.22% at 20,751.21 at the close. Mainland China markets were mixed. The Shenzhen Component reversed earlier losses to rise 0.75% to 12,602.78 and the Shanghai Composite was down fractionally at 3,281.74. In South Korea, the Kospi slipped 0.27% to 2,322.32 and the Kosdaq was up 0.38%. The Nikkei 225 in Japan pared losses and rose 0.62% to close at 26,643.39 while the Topix index was 0.23% higher at 1,893.13. Oil prices fell on Thursday as investors focused on the prospect of a large U.S. rate hike that could stem inflation but at the same time hit oil demand. Brent crude futures for September were down $2.21 to $97.36 a barrel after settling below $100 for the second straight session on Wednesday. U.S. West Texas Intermediate crude for August delivery was at $93.61 a barrel, down more than 2%. Gold prices shed more than 1% on Thursday, hovering near a one-year low, as the dollar extended its blistering rally after a hot U.S. inflation print cemented expectations around an aggressive Federal Reserve rate hike. Gold, which pays no interest, tends to be pressured when interest rates rise as this increases the opportunity cost of holding bullion. Spot gold fell 1.3% to $1,713.09 per ounce, after hitting its lowest since August 2021 on Wednesday. U.S. gold futures were down 1.4% to $1,711.