Stocks Struggle, Bonds Dip Amid Inflation Focus: Markets Wrap

US equity futures struggled for direction and Treasuries extended declines as investors assessed developments in the debate over how much central bank monetary policy tightening is needed to fight inflation.

Contracts on the S&P 500 were steady and those on the Nasdaq 100 edged lower. The latest drop in Treasuries pushed 10-year yields closer to 2.9% as traders raised bets on Federal Reserve interest-rate hikes. The dollar advanced against major peers.

Oil rose as investors assessed the future of OPEC+ unity, just as ministers from the group prepare to meet on Thursday to discuss its supply policy for July. Crude advanced about 10% in May, stoking more inflation worries.

Concerns that central-bank rate hikes may induce a recession are keeping investors guessing about the outlook for the economy as rising food and energy costs squeeze consumers, and volatility has picked up.

“US markets, and by default, global markets, will still indulge in schizophrenic swings in market sentiment as the FOMO dip-buyers become increasingly frantic in their attempts to pick a cyclical low in equity markets,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte.

Europe’s Stoxx 600 Index slipped a day after euro-zone figures showed a record jump in consumer prices. The figures strengthens the case for the European Central Bank to lift interest rates by a half-point in July, according to Austrian central bank chief and Governing Council member Robert Holzmann. He said a lack of “decisive action” now would risk expectations about the path for consumer prices becoming unanchored, requiring tougher measures later on that could trigger a recession.

President Joe Biden used a rare meeting with Federal Reserve Chair Jerome Powell to declare that he’s respecting the central bank’s independence – while simultaneously shifting responsibility for taming decades-high inflation ahead of the November midterms. The meeting came ahead of US payroll numbers Friday.

“There are heightened concerns around inflation and where central banks are likely to go trying to combat inflation,” Kristina Hooper, Invesco Advisers chief global markets strategist, said on Bloomberg Radio. “This has gone from just an inflation scare to a growth scare. Uncertainty has grown.”

Citigroup Inc. strategists said that after a difficult first five months of 2022, the pain may not be over yet for global equity markets. The prospect of downward revisions to earnings estimates is the latest headwind to face stock investors, already rattled by runaway inflation and the potential impact of central-bank tightening aimed at controlling it, the strategists led by Jamie Fahy wrote in a note.

In US premarket trading Wednesday, Salesforce Inc. climbed after the cloud-based customer management software company raised its annual profit forecast. ChargePoint Holdings Inc. slipped as analysts noted that the EV charging network firm’s margins came under pressure due to rising costs and supply-chain disruption.