Stock futures fall for a second day as rates jump with the Fed set to tighten policy aggressively

Stock futures fall for a second day as rates jump with the Fed set to tighten policy aggressively

Stock futures fell for a second day on Wednesday and interest rates surged to new highs as investors bet the Federal Reserve will aggressively tighten policy to fight inflation and slow the economy.

Minutes of the Fed’s most recent meeting are scheduled to be released on Wednesday afternoon. The minutes are from last month’s meeting when the central bank hiked interest rates and announced six more hikes this year. Investors are awaiting new details about the Fed’s plan to reduce its balance sheet after comments from Fed officials on Tuesday slammed stocks.

Futures on the Dow Jones Industrial Average fell 200 points, or 0.6%, on Wednesday. S&P 500 futures are down 0.85% and Nasdaq 100 index futures are down 1.5%. All three major moving averages headed for their second day of decline.

The 10-year Treasury yield jumped above 2.65% on Wednesday, hitting a three-year high and continuing its rapid rise this week. The price ended Monday at 2.40%.

Fed Governor Lael Brainard indicated his support for higher interest rates in a speech on Tuesday, saying a “rapid” reduction in the central bank’s balance sheet could begin as early as May. Following her remarks, the Dow retreated about 280 points and the Nasdaq Composite slipped 2.3%.

“It’s paramount to bring inflation down,” Brainard said during a Fed webinar in Minneapolis. Brainard has been named vice chair of the Federal Open Market Committee.

San Francisco Fed Chair Mary Daly also expressed concerns about inflation. “I understand that inflation is just as harmful as not having a job,” Daly said.

Tech stocks led Tuesday’s losses and were expected to fall again on Wednesday as investors rotated out of the group and braced for higher interest rates to slow the economy. Chipmakers suffered some of the biggest declines, with Nvidia and Marvell Technology falling more than 5% and 6%, respectively. Both companies were expected to continue their descent on Wednesday.

Shares in Tesla, Microsoft and Amazon were also all set to fall more than 2% on Wednesday, and Twitter is down 3% premarket after rallying this week on news that Elon Musk had acquired a large stake in the company. As the US Federal Reserve raises interest rates, investors have started to switch to stocks with stable earnings and shy away from those that offer future growth.

Investors continued to monitor recent developments outside of Europe as the war between Ukraine and Russia continues. The European Union and the US are preparing to impose new sanctions on Russia after evidence surfaced of war crimes allegedly being committed by Russian forces. The new sanctions include a ban on Russian coal imports. (Click here for the latest.)

Crude oil prices, which have been volatile since the start of the war, rose again on Wednesday after falling on Tuesday. US oil prices rose 1% to $102.98 a barrel, while international benchmark Brent gained about 0.65% to trade at $107.33 a barrel.