US futures worsening on Wall Street after the second consecutive negative session on the eve of the US stock market: yesterday the Dow Jones Industrial Average lost 90.22 points (-0.30%), at 30,333.59; the S&P 500 marked a decline of 0.8% to 3,665.78. The Nasdaq Composite lost 0.61% to 10,614.84.
At about 12.30 Italian time, the futures on the Dow Jones accelerated downwards, losing more than 130 points (-0.42%), those on the S&P 500 fell by 0.60%, those on the Nasdaq lost 0.91%.
Anxiety about the direction of interest rates continues to haunt market participants, also due to the flare-up in US Treasury yields. Yesterday those at 10 years flew up to 4.22%, taking a jump of more than 20 basis points in two sessions. And the bullish march does not stop there. As of today, 10-year Treasury rates continue to point higher, climbing to 4.2843%, a new record since 2008.
The 2-year Treasury rates also rose, having jumped in the last few hours to a new all-time high in 15 years, from 2007, to 4.639%.
The markets are pricing in a more aggressive Fed, as evidenced by the futures on fed funds maturing in May 2023 which, in the last few hours and for the first time, have jumped above the 5% threshold, confirming how traders expect the bank central will raise rates to that level before stopping in its fight against inflation.
To add to the dose of an even more hawkish Fed in the last few hours were the statements of the president of the Federal Reserve of Philadelphia, Patrick Harker, in a speech reported by the CNBC website.
Harker indicated that the highest level of interest rates has done little to keep inflation in check so far. The next meeting of the FOMC, the monetary policy arm of the Federal Reserve led by Jerome Powell, is scheduled for 1-2 days November 1-2.
The consensus predicts the fourth consecutive rate hike of 75 basis points, aimed at curbing US inflation, from the current range between 3% and 3.25%. “We will continue to raise rates for a while. Given the clear and disappointing lack of progress in curbing inflation, I predict that we will move well over 4% by the end of the year, ” Harker said, continuing.“At some point next year, we will stop rising rates. taxi. At that point, we should keep rates in the tightening phase for some time to get monetary policy to do its job. It will take a while for the higher costs of capital to affect the economy. After that, if necessary, we will be able to raise rates again, depending on the data ”.