U.S. stock futures fell and government bond yields rose to new multi-year highs as investors worried about further interest rate hikes and measures to contain Covid-19 in China will affect growth.
Futures on the S&P 500 fell 2%, which adjusted the major indexes for another day of losses after the opening call in New York. Contracts related to the technology-oriented Nasdaq-100 fell 2.4%, while contracts with the Dow Jones Industrial Average fell 1.5%.
U.S. government bonds sold out again, boosting yields on 10-year Treasury bonds to 3.183% on Monday from 3.124% on Friday. This set him on course to a new new multi-year high. 10-year yields rose 1.6 percentage points from late 2021 to Friday, forcing some investors to overestimate the appreciation of technology and rising stocks. Bond yields rise when prices fall.
“Yields are rising because investors think inflation is out of control,” said Peter Anderson, founder of investment firm Andersen Capital Management in Boston. “The reality is that we have been living at extremely low rates for a long time, and it is natural for the Fed to raise rates, regardless of inflation,” he added.
The Cboe volatility index – the so-called Wall Street Fear Index, also known as the VIX – rose to 33.56, the highest level of closure since March 8.
Last Wednesday, U.S. bonds and stocks rose after the Federal Reserve approved an increase in lending rates by half a percentage point to a target range of 0.75% to 1%. Fed Chairman Jerome Powell said officials are not considering an even bigger increase at the next central bank meeting. Mr Powell also said inflation was too high and that the Fed would act quickly to reduce it. He pointed to the price index for personal consumer spending, which rose 6.6% in March.
A day after Mr Powell’s comments, shares fell sharply, and the decline continued until Friday, extending a series of losses for the US market, in which the S&P 500 and Nasdaq Composite Index fell for five consecutive weeks. As of last Friday, the Nasdaq had lost 22% for the year, while the S&P 500 was down 13% and the Dow was down 9.5%.
“From day to day there was no news that would cause such a dramatic shift in mood over the 24-hour period. Market volatility shows that there is a great deal of uncertainty as to where people think we are heading, ”Mr Andersen said.
The prospect of further raising interest rates to fight inflation has worried some investors that such measures are slowing economic growth. The shifts in politics came at a time when Russia’s war against Ukraine and measures to contain new Covid-19 outbreaks in China have clouded prospects.
“Our growth is slowing down and financial conditions are getting worse,” said Hani Redha, PineBridge Investments’ portfolio manager. “It’s the opposite of what we had 18 months before this year, which was the perfect backdrop for risk markets.”
These fears have forced some cash executives to keep the dollar, which is seen as a safer investment in times of volatility, because of its status as a world reserve currency. The WSJ dollar index, which measures the U.S. currency against a basket of 16 others, rose 0.3 percent on Monday.
Commodity futures for Brent crude oil fell 2.5% to $ 109.57 a barrel. Increased oil prices since the start of Russia’s war against Ukraine have begun to decline as traders worry that blockades to curb the spread of Covid-19 in China will lead to a drop in global demand.
The price of bitcoin fell over the weekend and traded at $ 32,998.86 on Monday, down 8.5% from Friday’s 5pm ET. The popular cryptocurrency has lost more than a quarter of its value over the year.
Shares of cryptocurrency companies fell on Monday in premarketing trading along with bitcoin. Shares of cryptocurrency exchange Coinbase Global fell by 4.8%, and shares of Marathon Digital Holdings, a company engaged in bitcoin mining, fell by 7.6%.
Abroad, the pan-continental Stoxx Europe 600 fell 2%, as a result of declining core resources and the travel and leisure sectors.
In Asia, Japan’s Nikkei 225 fell 2.5% on Monday, while Australia’s S & P / ASX 200 fell 1.2%.
China’s CSI 300 index, which tracks the largest companies in Shanghai or Shenzhen, fell 0.8%. Hong Kong markets were closed for the holidays.
Email Serena Ng at Serena.Ng@wsj.com and Caitlin Ostroff at email@example.com
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