Stock Futures Drop After Selloff, Global Stocks Slide

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10-year Treasury yields are on track to fall for seven out of nine trading days

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Dow Jones Industrial Average futures fell 1% on Thursday and contracts for the technology-focused Nasdaq-100 skidded 1.4%.

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Investors bought government bonds, perceived as a haven asset in times of economic uncertainty. The yield on 10-year Treasury notes edged down to 2.859% from 2.884% Wednesday. The move put yields, which had shot up for much of the year as the Federal Reserve began to raise interest rates, on course to fall for seven in nine trading days. Bond yields and prices move in opposite directions.

International stocks retreated, tracking the US selloff. The Stoxx Europe 600 shed 1.7%, led lower by shares of financial-services and food-and-beverage companies. Hong Kong’s Hang Seng Index tumbled 2.5% as shares of Tencent dropped 6.6% after the videogame giant reported its worst quarterly profit drop since listing in the city.

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Earnings reports from some of America’s biggest retailers in recent days added to concern that the highest rate of inflation in four decades is catching up with US consumers and pitching the economy toward a recession. Investors were already grappling with the end of an era of loose monetary policy that had stoked big gains for stocks and other riskier assets.

The war in Ukraine, meanwhile, is adding to inflationary pressures prompting the Fed to embark on a series of interest-rate rises and to reduce its bondholdings. And Covid-19 shutdowns in China have led to a sharp slowdown in the world’s second-biggest economy.

The combination of factors has fed into steep losses for stocks and some corporate bonds, and many investors expect the volatility to continue. “The price action suggests it’s not over,” said Philip Saunders, a portfolio manager at Ninety One,

an asset manager based in the UK and South Africa.

Looking ahead, investors will parse earnings reports from Kohl’s,

VF Corp,

and BJ’s Wholesale Club for fresh evidence of how successfully companies are able to pass higher costs onto consumers. Walmart and Target this week said higher costs ate into profits in the latest quarter, leading to a selloff of their shares that rippled through the broader market.

“Throw monetary policy tightening into the mix, we’ve got a recipe for volatility and investor jitteriness,” said Clara Cheong, a global market strategist at JP Morgan Asset Management.
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Also coming up are data on home sales in the US The figures from the National Association of Realtors are expected to show sales of existing homes fell for a third-straight month in April as rising mortgage rates and climbing prices cooled the housing market.

Energy markets steadied after falling in tandem with stocks Wednesday. Brent crude, the global oil benchmark, ticked down 0.2% to $108.93 a barrel.

Elsewhere in Asia, the CSI 300 index of the largest stocks listed in Shanghai and Shenzhen edged up 0.2%. Japan’s Nikkei 225 dropped 1.9% and South Korea’s Kospi Composite declined 1.3%.

Write to Dave Sebastian at [email protected] and Joe Wallace at [email protected]


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