U.S. stock 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 469 points, or 1.52%. S&P 500 futures were 1.33% lower, and Nasdaq 100 futures lost 0.9%.
Futures added to their losses after JPMorgan Chase reported quarterly earnings that missed analyst expectations and halted buybacks. The stock fell more than 3% in premarket trading. Morgan Stanley also dipped in the premarket following a miss on the top and bottom lines.
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.
The CPI report also impacted treasuries, sending the 2-year Treasury yield up 9 basis points to about 3.138% while the yield on the 10-year Treasury fell about 4 basis points to 2.919%. That sent the inversion, which is a popular signal of a recession, to its widest since 2000.
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.
In other news, the Beige Book, released Wednesday by the Fed showed worries of an upcoming recession amid high inflation.
“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.”
June’s producer price index report, which measures prices paid to producers of goods and services, showed wholesale prices rise 11.3% last month as energy prices jumped and offered further insights into the health of the economy.
Earnings season continues on Friday with results from Wells Fargo and Citigroup.
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