Stock futures fell Tuesday night, following another wild session for the market.
Dow Jones Industrial Average futures dropped 168 points, or 0.5%. S&P 500 futures slid 0.7%, and Nasdaq 100 futures were off by 1.1%.
Microsoft shares dropped more than 4% in after-hours trading, after the company’s latest quarterly report showed moderating revenue growth for its Azure cloud business. Microsoft posted quarterly earnings and revenue that beat analyst expectations, however.
The Dow ended the regular trading day down 66 points, or 0.2%. However, the 30-stock average was down as much as 818.98 points on the session and briefly traded up by as much as 226.54 points. Those moves came a day after the Dow recovered from a 1,115-point deficit to post a slight gain.
The S&P 500 and Nasdaq Composite also closed well off their session lows on Tuesday, but still lost 1.2% and 2.3%, respectively.
Anu Gaggar, global investment strategist at Commonwealth Financial Network, said she thinks this sharp volatility is a byproduct of investors bracing for tighter monetary policy from the Federal Reserve.
“The market is exhibiting withdrawal symptoms as it is dealing with the possibility of the removal of the Fed put,” Gaggar said. “It almost feels like the market is behaving a little incoherently, not knowing which way to go – go down because the Fed is tightening or go up because the Fed is finally acting to rein in inflation and is loading up on ammunitions while economic growth remains strong.”
The Fed is slated to conclude a two-day policy meeting Wednesday, with an announcement coming at 2 p.m. ET. The central bank isn’t expected to announce any policy changes, but investors will look for clues on when — and by how much — the Fed will raise interest rates later this year. Investors will also look for hints on the next steps the Fed will take to further unwind the stimulative measures taken in 2020 to support the economy at the pandemic’s onset.
“Between rate hikes and tapering the $9tn balance sheet, we could be looking at a monetary regime that is changing quickly,” Gaggar said.
Treasury yields have jumped sharply to start the year in anticipation of tighter monetary policy from the Fed. Last week, the benchmark 10-year note yield briefly broke above 1.9%. On Tuesday, the yield closed at 1.77% — that’s still more than 20 basis points above where it ended 2021.
On the data front, International trade numbers are slated for release Wednesday at 8:30 a.m. ET. New home sales data are set to come out at 10 a.m. ET.
The corporate earnings season also continues Wednesday, with Dow member Boeing and AT&T reporting before the bell. Tesla and Intel are scheduled to post their latest quarterly figures after the close.
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