US stock futures fall as Powell testimony looms, recession worries return to center stage

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Recession worries returned to the spotlight on Wall Street on Wednesday, with stock futures and oil prices falling as investors eagerly awaited testimony in Congress from Federal Reserve Chairman Jerome Powell. .

How are stock index futures traded?
  • S&P 500 ES00 futures contracts,
    -1.69%
    fell 1.6% to 3,707

  • Futures contracts Dow Jones Industrial Average YM00,
    -1.46%
    fell 437 points, or 1.4%, to 30,086

  • Nasdaq-100 NQ00 futures,
    -1.90%
    fell 1.8% to 11,366

After a long holiday weekend, the Dow Jones Industrial Average DJIA,
+2.15%
rallied 641.47 points, or 2.2%, to end at 30,530.25 on Tuesday. The S&P 500 SPX,
+2.45%
rose 2.5% to 3,764.79, and the Nasdaq Composite COMP,
+2.51%
climbed 2.5%, to end at 11,069.30.

The gains followed the S&P 500’s worst week in two years, with the Dow and Nasdaq also suffering steep losses.

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What is driving the market?

The impending pullback in Wall Street stocks is unlikely to surprise strategists who said Tuesday that the rebound was nothing more than an oversold bounce. Asian equities largely shrugged off the US recovery and oil prices fell as investors refocused on recession-related concerns and expectations of continued monetary tightening.

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Strategists at some of Wall Street’s biggest banks were overheard warning clients to start the week that markets were still not correctly pricing the likelihood of a recession.

“The bear market will not be over until the recession arrives or the risk of a recession is extinguished,” Morgan Stanley chief U.S. equity strategist Mike Wilson said in a note on Tuesday. . He said another drop of 15% to 20% was to be expected, taking the S&P 500 to 3,000.

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Investors will scan Fed Chairman Powell’s comments for more monetary policy clues as he testifies before the Senate Banking Committee beginning at 9:30 a.m. Eastern Time.

“FOMO [fear of missing out] the gnomes on Wall Street will be desperate for signs that it is blinking on the crunch so they can rush back to their happy place of buying,” Jeffrey Halley, senior market analyst at OANDA, told clients in a note.

Other Fed speakers are also lined up for Wednesday, including Philadelphia Fed President Patrick Harker via an interview at 9 a.m. EST, Chicago Fed President Charles Evans at 12:50 p.m. EST and Harker and Richmond Fed Chairman Tom Barkin, who will appear jointly on a panel discussion at 1:30 p.m. EST.

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As equities were poised to fall, money flowed into traditional safe havens such as bonds and the dollar. The yield of the 10-year Treasury note TMUBMUSD10Y,
3.235%
fell 7 basis points to 3.228%, while the ICE Dollar Index DXY,
+0.25%,
which measures the dollar against a basket of major currencies, rose 0.4% to 104.91.

US CL.1 Crude Price,
-4.34%
fell 5% to $103.39 a barrel, with Brent BRN00,
-3.79%
close to that at $109.27 a barrel, both more than returning Tuesday’s rise. In addition to concerns about demand fueled by fears of recession.

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