Dow futures slump nearly 600 points as second day of selling in store after inflation shock

U.S. stock futures looked set to break below the lows of May, as financial markets continue to reel from a surprise acceleration in inflation just days ahead of a Federal Reserve interest-rate decision.

What’s happening
  • Futures on the Dow Jones Industrial Average
    YM00,
    -1.78%

    fell 597 points, or 1.9%, to 30762.

  • Futures on the S&P 500
    ES00,
    -2.20%

    dropped 92.75 points, or 2.4%, to 3808.

  • Futures on the Nasdaq 100
    NQ00,
    -2.76%

    decreased 350.5 points, or 3%, to 11517.

On Friday, the Dow Jones Industrial Average
DJIA,
-2.73%

fell 880 points, or 2.73%, to 31393, the S&P 500
SPX,
-2.91%

declined 117 points, or 2.91%, to 3901, and the Nasdaq Composite
COMP,
-3.52%

dropped 414 points, or 3.52%, to 11340.

The S&P 500 ended Friday only fractionally above the May closing low of 3900.79. The Dow and the Nasdaq also are in danger of falling below May’s lows.

What’s driving market

Friday’s news showing the consumer price index shooting to a fresh 40-year high of 8.6% year-over-year has caused investors to reassess how high the Fed will go in raising interest rates.

In addition to speculation that the Fed may lift interest rates as much as 75 basis points on Wednesday, the yield on the 2-year Treasury
TMUBMUSD02Y,
3.186%

has climbed to 3.20% — up from 2.80% on Thursday.

“Sentiment has changed dramatically as market participants have realized that we have a galloping food crisis due to Russia’s tactics in Ukraine, China could very well move in and out of lockdowns for months causing global supply shocks, and a recession is now very likely as the only option to kill demand and inflation,” said Peter Garnry, head of equity strategy at Saxo Bank.

The tightening isn’t limited to the U.S. Last week, the European Central Bank suggested it could follow up a quarter-point rate hike in July with a 50-basis point move in September, as the Bank of England also readies another rate hike this week.

The fallout has been stark in cryptocurrencies, with bitcoin
BTCUSD,
-12.49%

extending its weekend plunge to trade below $25,000. The crypto lending platform Celsius Network has suspended withdrawals and transfers.

“The unprecedented move by Celsius is effectively blocking clients from accessing their assets which will do little to quell fears from critics that some DeFi platforms could be Ponzi schemes,” said Nigel Green, chief executive of financial advisor deVere Group.

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