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U.S. stock futures point to fifth day of losses as economic growth worries linger

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U.S. stock futures were struggling to recover ground after a four-day losing streak, amid worries about the chances of an economic downturn in coming months.

How are stock-index futures trading
  • S&P 500 futures
    ES00,
    -0.24%
    fell 10.25 points, or 0.2% to 3935

  • Dow Jones Industrial Average futures
    YM00,
    -0.14%
    fell 53 points, or 0.1% to 33574

  • Nasdaq 100 futures
    NQ00,
    -0.40%
    dropped 52.50 points, or 0.4% to 11512

On Tuesday, the Dow Jones Industrial Average
DJIA,
-1.03%
fell 351 points, or 1.03%, to 33596, the S&P 500
SPX,
-1.44%
declined 58 points, or 1.44%, to 3941, and the Nasdaq Composite
COMP,
-2.00%
dropped 225 points, or 2%, to 11015.

What’s driving markets

A four-day losing streak, during which the S&P 500 has lost 3.4%, showed little sign of being snapped as investors continued to fret about the economic damage eventually inflicted by high inflation and the Federal Reserve’s campaign to damp it.

“The recent run of macro data points in the U.S. continues to underscore relatively solid economic trends. And combined with the recent easing in financial conditions, it may trigger a need for the Fed to push back in December. Put another way, the dove camp is feeling some pain,” said Stephen Innes, managing partner at SPI Asset Management.

Jim Reid, strategist at Deutsche Bank , noted that the S&P 500 had now lost ground in the last seven out of eight sessions. “In fact, the latest moves for the S&P mean it’s now unwound the entirety of the rally following Fed Chair Powell’s [supposedly dovish] speech last week, which makes sense on one level given he didn’t actually say anything particularly new.”

The S&P 500 has fallen 17.3% in 2022 as the Federal Reserve has driven borrowing costs sharply higher in an effort to tame inflation that until recently was running at the fastest pace in 40 years.

The Fed’s monetary tightening alongside stubborn inflation may deliver a marked economic slowdown, senior bankers such as JPMorgan’s Jamie Dimon and Goldman Sachs’s David Solomon warned this week.

“Fears are growing that economies are in for a rough time ahead as feverish inflation and the bitter interest rate medicine being used to bring it down take effect,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

“Worries deepened amid warnings from U.S. banking and media sectors that navigating through the storm would not be easy, while the latest data has shown China’s trade has been sideswiped by a drop in global demand and zero-Covid policies. Despite today’s easing of restrictions it’s clear China’s Covid nightmare is not at an end,” Streeter added.

The Hang Seng index
HSI,
-3.22%
in Hong Kong fell 3.2%, suggesting investors had already discounted Beijing’s more relaxed COVID stance.

However, long time bull Tom Lee, head of research at Fundstrat, reckons equities will benefit in coming weeks as investors start to get greater clarity on when the Fed may stop tightening policy.

“We don’t think the end of the inflation war in 2022 is the Fed cutting rates. It is when Fed and markets see sufficient progress in inflation to remove the upside risks to higher rates. We think this could happen as early as the November CPI report. This will be released on 12/13,” Lee wrote in a note.

“And if November CPI is soft, we think this will support a strong year-end rally. Admittedly, a 10% move between now and [year end] seems a stretch given the S&P 500 is around 4,000 but… the broader point is we see stocks having positive skew given the cautious positioning of investors and the possibility of very favorable incoming inflation reports,” Lee added.

U.S. economic updates set for release on Wednesday include third-quarter productivity and unit labor costs at 8:30 a.m. and consumer credit for October at 3 p.m.. All times Eastern.

Credit: marketwatch.com

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