Stock futures edge slightly higher as Wall Street assesses Russia-Ukraine tensions and potential Fed rate hikes
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, January 18, 2022.
Brendan McDermid | Reuters
Equity futures were slightly higher on Sunday evening as investors continued to watch developments in Ukraine-Russia tensions and potential Fed rate hikes.
Futures contracts linked to the Dow Jones Industrial Average climbed 83 points, or 0.2%. S&P 500 futures rose 0.1% and Nasdaq 100 futures added 0.05%.
The moves follow a turbulent week for stocks, which came under pressure from a high inflation report and fears of a Russian attack on Ukraine. The Dow Jones and S&P 500 fell 1% and 1.8% respectively for the week. The tech-heavy Nasdaq Composite slid more than 2%.
On Friday, the Dow Jones fell 503.53 points, or 1.43%. The S&P 500 fell 1.9% and the Nasdaq Composite lost 2.8%. The declines came as the White House warned that a war in Ukraine could start “any day” and urged Americans to leave “immediately”. Oil prices jumped on Friday, along with traditional safe havens like Treasuries.
“The real fear is that China is supporting Russia and that China-US relations continue to deteriorate,” said Robert Cantwell, chief investment officer at Upholdings. “How this changes the relationship of the United States with other economic superpowers – that’s what’s really scary and would affect economic outcomes.”
A phone call over the weekend between US President Joe Biden and Russian President Vladimir Putin, in which Biden tried to dissuade Putin from attacking Ukraine, failed to make a breakthrough.
Some airlines have also halted or redirected flights to Ukraine amid the brewing crisis, while the Pentagon ordered the departure of US troops from Ukraine.
Traders are also weighing the potential impact of soaring inflation on the US economy, as well as potential actions the Federal Reserve could take to quell soaring prices.
The Labor Department reported last week that inflation in January jumped 7.5%, its biggest rise since 1982. Rate-sensitive tech stocks were hit hard by the report, which briefly sent yield 10-year Treasury above 2% – the first time since 2019 that the 10-year has traded above this level.
After the report was released, St. Louis Fed President James Bullard said he was open to a 50 basis point rate hike next month, adding that he wanted to see a full percentage point full of increases by July. To be sure, San Francisco Fed President Mary Daly said on Sunday that the central bank should take a “measured” approach when raising rates.
“Last week the main story was about inflation,” Cantwell said. “Every time the inflation number comes out, it continues to beat expectations and even though the Fed has signaled that they are going to raise rates, they haven’t actually raised them. The longer they wait, the sooner they will have to. raise them.”
Goldman Sachs economists also raised their Fed forecast to seven hikes for 2022 and said the 10-year would hit 2.25% this year.
The company also lowered its S&P 500 price target for 2022 to 4,900 from 5,100. That would only represent a 2.8% return from where the benchmark ended in 2021. Goldman said higher rates would lower valuations.
Revenue is expected to rise again this week, with Nvidia, Walmart, Shopify, AMC and others expected to report.