Futures slip on worries over rising inflation and rate hikes
2022.06.07 14:15
FILE PHOTO: A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 1, 2022. REUTERS/Brendan McDermid
(Reuters) – U.S. stock index futures slipped on Tuesday on concerns over risks from rising inflation and the Federal Reserve’s plan to further raise interest rates, while Kohl’s Corp (NYSE:KSS) rose on news about a potential sale.
Shares of the department store chain jumped 13.6% in premarket trading as it entered exclusive talks with retail store operator Franchise Group (NASDAQ:FRG) Inc over a potential sale that would value it at nearly $8 billion.
Megacap growth stocks retreated, pressured by U.S. Treasury yields, which hovered near 3-1/2-week highs ahead of inflation data on Friday. Tesla (NASDAQ:TSLA) Inc fell 1.4% and Microsoft Corp (NASDAQ:MSFT) 0.8%.
A hot reading on the consumer price index could bolster expectations that the Fed will continue to aggressively hike rates in the second half of this year, at a time when labor market is buoyant and consumers spending remain resilient.
Money markets are expecting 50-basis points rate increases next week and in July, and possibly in September too.
“There is quite a bit of uncertainty at the moment in terms of inflation and the growth outlook and until investors have a better idea of how high interest rates will go, equities are likely to struggle,” said Raffi Boyadjian, lead investment analyst at brokerage XM.
World shares also fell as a surprise 50-basis-point rate increase in Australia raised concern over policy tightening, while oil prices hovered just below $120 a barrel on expected recovery in China demand.
U.S. stocks ended a choppy session slightly higher in the previous session, helped by gains in Amazon.com Inc (NASDAQ:AMZN) and other megacap growth shares.
At 6:29 a.m. ET, Dow e-minis were down 172 points, or 0.52%, S&P 500 e-minis were down 25.5 points, or 0.62%, and Nasdaq 100 e-minis were down 107.75 points, or 0.85%.
The CBOE volatility index rose for the third straight day and was last up at 25.64 points.
