US Stock Futures Slide Amid Recession Fears: Markets Wrapped

(Bloomberg) — US stock index futures fell as growing signs of a global economic slowdown heightened investor concerns that the early-year rally in risky assets may have gone too far.

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Contracts on the S&P 500 fell 0.7% after the benchmark index fell the most in a month on Wednesday amid weaker-than-expected economic data. Nasdaq 100 futures lost 0.8%. Treasuries fell and the euro traded steady after the European Central Bank chief reaffirmed her aggressive stance. The sell-off spread across global markets, from Japanese stocks to oil futures.

In New York trading, Procter & Gamble slipped as it reported shrinking sales volume. Shares of Philip Morris International rose after Jefferies LLC improved its view of the stock.

The rally driven by optimism about the reopening of the Chinese economy is starting to fade as data releases point to a decisive slowdown in the rest of the world. Reports from the US showed a drop in consumer demand and business investment, which boosts the possibility of a recession in the world’s largest economy. However, that hasn’t stopped Fed officials from reaffirming the need for more hawkish monetary policy.

America first becomes America last in the great market reversal

said Sailesh Jha, chief economist and head of market research for RHB Banking Group, in an interview with Bloomberg TV.

Europe’s stock index snapped its longest winning streak since November 2021, falling by the most in a month. Australian bonds rose after employment levels in the country fell unexpectedly in December. The New Zealand dollar fell 1.1% amid news that Prime Minister Jacinda Ardern will step down next month.

The euro rose 0.2% against the dollar as European Central Bank President Christine Lagarde said inflation on the continent remains too high and policymakers will not waver in their efforts to bring inflation back on target.

Treasuries initially advanced across the curve, but later gave up the gains. The dollar traded lower, with the Japanese yen contributing more to its losses.

In the United States, data on Wednesday showed lower producer prices and retail sales, while commercial equipment production declined. The decline in factory production concluded the weakest quarter for manufacturing since the start of the pandemic. Even after this string of bad data, Fed officials have repeated their calls for more rate hikes.

St. Louis Fed President James Bullard said policy was not yet in the constrained territory and projected a projected rate of up to 5.5% by the end of the year in the Fed’s point chart outlook. It is “almost” in restricted territory but not quite. Cleveland Fed President Loretta Mester said the Fed needs to “keep going,” and Philadelphia Fed President Patrick Harker reiterated his view of raising interest rates in quarter-point increments “in the future.”

Procter & Gamble stock fell 3.8% in pre-market trading in New York after it said total volume of goods sold fell 6% in the three months ending in December. That was worse than the 2.6% that analysts had estimated. Discover Financial Services fell 6.4% as the company reported higher-than-expected fees for the fourth quarter. Philip Morris stock rose 1.2% after Jefferies upgraded the stock to Buy, citing the outlook for low-risk products in the tobacco industry.

Oil fell for a second day as traders had to deal with recession fears in the US as well as another build in inventories. West Texas Intermediate is down about $79 a barrel.

Main events this week:

  • US Housing Starts, Initial Jobless Claims, Philadelphia Fed Index Thursday

  • The European Central Bank reports on its December policy meeting and President Christine Lagarde at a panel in Davos, Thursday

  • Among the Fed’s speakers are Susan Collins and John Williams, Thursday

  • Japanese CPI, Friday

  • The main interest rates on Chinese loans, Friday

  • US existing home sales, Friday

  • Kristalina Georgieva of the International Monetary Fund and Lagarde of the European Central Bank speak in Davos on Friday

Here are some of the major market movements:

Stores

  • S&P 500 futures were down 0.7% as of 9:06 a.m. New York time.

  • Nasdaq 100 futures fell 0.7%.

  • Dow Jones Industrial Average futures fell 0.6%.

  • The Stoxx Europe 600 fell 1.3%

  • MSCI World Index fell 0.4%

currencies

  • The Bloomberg Spot Dollar Index has not changed

  • The euro rose 0.1 percent to $1.0809

  • The British pound was little changed at $1.2347

  • The Japanese yen rose 0.4% to 128.41 per dollar

Digital currencies

  • Bitcoin changed little at $20,767.7

  • Ether fell 0.2% to $1,524.49

bonds

  • The yield on the 10-year Treasury note advanced three basis points to 3.40%.

  • Germany’s 10-year yield advanced five basis points to 2.08%.

  • The yield on the 10-year British Bund advanced three basis points to 3.34%.

goods

  • West Texas Intermediate crude rose 0.6 percent to $79.92 a barrel

  • Gold futures rose 0.3 percent to $1,912.70 an ounce

This story was produced with help from Bloomberg Automation.

— with assistance from Richard Henderson and Denitsa Tsekova.

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