Stock futures rise slightly after a losing week on Wall Street
Traders at the NYSE floor, June 3, 2022.
After a week of losses, stock futures rose in overnight trading on Sunday as investors bet the Federal Reserve would tighten its monetary policy to counter rising inflation.
Futures on Dow Jones Industrial Average gained fifty points. S&P 500 futures and Nasdaq 100 futures both rose 0.2%.
Following another week of disappointing results for investors, the overnight action was followed by modest losses on major averages. The blue-chip Dow fell 0.9% for its ninth negative week in 10, while the S&P 500 and the Nasdaq Composite lost 1.2% and 1%, respectively, last week for their eighth losing week in nine.
Investors worry that the central bank might raise interest rates too rapidly and too often, creating a recession. Recent comments from rate-setting Fed members suggest that 50 basis point — or a half-percentage-point — rate increases are likely at the June and July meetings.
U.S. Economy added 390,000 jobsThe May readings were better than expected, despite the rising inflation rate and fears about an economic slowdown. Investors believe that the Fed could become more aggressive because of the solid hiring data.
“For now, the market sees a Federal Reserve trying to navigate a painful and bumpy road, yet trying to find a soft exit,” said Quincy Krosby, chief equity strategist at LPL Financial. “The market feels stuck between wanting to believe that rallies will continue and believing that the Fed is capable of negotiating a soft landing.
Investors will focus on Friday’s release of the Consumer Price Index reading for May. Some could interpret this as confirmation of inflation peaking.
It has been a turbulent year for the stock market, with all major averages losing double digits on their previous record highs. The S&P 500 is off by 14.7% from its all-time high reached in January. In the last month’s bear market, the equity benchmark was briefly in decline.
Peter Essele of Commonwealth Financial Network, who heads portfolio management, said that the second half 2022 will be an uphill ride for investors. “Unless the Fed can bring inflation under control and not have a hard landing,” he added. As recessionary fears are omnipresent and the equity markets lack any positive momentum, most investors appear to be betting on a crash-and burn scenario.