Stock futures slipped Wednesday evening heading into overnight trading after equities did an about-face in the earlier session, plummeting from record highs as investors mulled the likelihood of tighter Federal Reserve policy and interest rate hikes as soon as March.
Contracts on all three major indexes were down to extend a bearish day, spurred by the release of minutes from the Federal Open Market Committee’s (FOMC) meeting December 15 that flagged concerns from policymakers about worsening inflation and signaled more aggressive intervention by the central bank.
Renewed pressures in tech amid interest rate worries sent the Nasdaq spiraling 3.1% in its biggest drop since March, and the S&P 500 shed 1.9%, dragged down by losses in real estate. The Dow Jones Industrial Average tumbled more than 1%, falling for the first time this year.
“We actually like tech for all of 2022 in our outlook, but there’s no doubt that tech is going to take it on the chin when the yield curve does what it does,” Wells Fargo CIO of Wealth & Investment Darrell Cronk told Yahoo Finance Live. “[The response to] Fed meeting minutes suggests that long-duration assets like tech or REITs that are interest-rate sensitive will really come under pressure in moments when you believe the Fed is going to take a more hawkish stance.”
The minutes, underscoring this hawkishness, helped the benchmark 10-year Treasury yield top 1.7%, its highest level since April.
“The primary piece of the puzzle is the Fed,” Zephyr market strategist Ryan Nauman told Yahoo Finance Live. “Markets don’t really react too greatly to when the Fed starts hiking rates — it’s the pace — and if the Fed increases the pace of interest rate hikes and there are a couple of surprise hikes in there to tame inflation, that’s when we can really get an impact on equity markets and see a steep pullback.”
Traders also weighed fresh economic data on Wednesday that showed private payroll gains last month surpassed economist estimates. ADP, whose report sets expectations for the “official” government jobs numbers set for release by the Labor Department on Friday, reported private sector employers added back 807,000 jobs during the final month of November, nearly doubling consensus forecasts and suggesting job growth picked up to help relieve some labor shortages.
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Employment figures will remain in the spotlight for the rest of this week.
Investors will tune in on Thursday for a fresh read on initial weekly jobless claims, likely to come in near record lows again, and for the monthly jobs report due for release on Friday for a more meaningful look at the strength of hiring and labor force participation — key measures of the U.S. economy.
Here were the main moves in markets heading into the overnight session:
S&P 500 futures (ES=F): -92.25 points (-1.93%), to 4,692.00
Dow futures (YM=F): +33.00 points (+0.09%), to 36,324.00
Nasdaq futures (NQ=F): -1.50 points (-0.01%) to 15,765.00
Crude (CL=F): -$0.75 (-0.96%) to $77.10 a barrel
Gold (GC=F): -$14.30 (-0.78%) to $1,810.80 per ounce
10-year Treasury (^TNX): +2.2 bps to yield 1.705%
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc