Dow Jones futures drop 340 points after tough Fed talk drives fresh concerns about a recession
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- US stock futures fell sharply Thursday, with the Dow dropping 340 points, as traders worried about a recession.
- Fed Chair Jerome Powell and other central bankers on Wednesday reiterated their commitment to taming inflation, even at the expense of growth.
- Longer-dated bond yields fell, in a sign investors expect central banks to have to cut interest rates in the future.
US stock futures tumbled Thursday after Federal Reserve Chair Jerome Powell's tough talk on inflation sparked fresh concerns among investors about a recession.
Dow Jones futures fell as much as 380 points and were down 1.11%, or 343 points, as of 6.00 a.m. ET. S&P 500 futures were 1.43% lower, and Nasdaq 100 futures were down 1.80%.
European stocks dropped as economic fears also mounted on the continent, with the pan-continental Stoxx 600 down 1.82% in morning trading. Frankfurt's DAX lost 2.37%, while London's FTSE 100 was 1.80% lower.
In Asia overnight, Tokyo's Nikkei 225 fell 1.54%. But China's CSI 300 bucked the trend and rose 1.44% on signs that the outlook is improving for the world's second-biggest economy.
Strong words on inflation from the world's most important central bankers on Wednesday triggered the latest sell-off in stocks.
Speaking at a European Central Bank conference in Portugal, Powell said the US economy remains strong. But he said there's "no guarantee" that it will avoid a sharp slowdown as the Fed hikes interest rates, underlining the central bank is prioritizing its efforts to tame inflation.
"The process is highly likely to involve some pain, but the worse pain would be in failing to address this high inflation and allowing it to become persistent," Powell said.
ECB President Christine Lagarde and Bank of England Governor Andrew Bailey echoed Powell's commitment to controlling price rises, warning that red-hot inflation could become entrenched if they don't act decisively.
Investors should prepare for more challenging months ahead, according to Mark Haefele, chief investment officer at UBS Wealth Management.
"There are a lot of potential outcomes for markets, but the only near certainty is that the path to the end of the year will be a volatile one," he told clients in a note.
The yield on the key 10-year US Treasury note, which moves inversely to the price, fell almost 4 basis points Thursday to 3.057%. Analysts said the fall is a sign investors expect the Fed will be compelled to cut interest rates in the future as growth slows.
The May reading on the core US personal consumption expenditure deflator is scheduled for release at 8.30 a.m. ET. Data on personal spending and income are also due.
"The release of the latest PCE index, a preferred Fed gauge of inflation, will provide further clues on consumers' willingness or otherwise to spend," said Richard Hunter, head of markets at trading platform Interactive Investor.
Recent data has suggested this "vital cog of the US economy may be withdrawing in the face of higher energy and food prices," he added.
Elsewhere, oil prices were little changed after falling Wednesday thanks to worries about growth and demand. WTI crude was roughly flat in choppy action at $109.44 a barrel, while Brent crude was trading at $112.32.
The dollar index was up slightly at 105.17. Meanwhile, bitcoin traded below $20,000 as the dramatic crypto sell-off showed no signs of easing, and was last changing hands down 5% at $19,159.
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