U.S. stock futures fell and bond yields largely rose, suggesting that the volatility driven by higher-than-expected inflation data would extend into a second day.
Futures tied to the S&P 500 declined 0.5% Friday, suggesting the broad index is set to fall further after it closed down 1.8% Thursday. Nasdaq-100 futures retreated 0.7%, indicating losses for technology stocks after the opening bell. Dow Jones Industrial Average futures pulled back 0.4%.
Stocks have traded choppily this week, buffeted by earnings reports and shifting expectations about the prospective pace of central banks’ monetary tightening. Data on Thursday showed that U.S. inflation hit 7.5% in January, a four-decade high. A Federal Reserve official said the central bank may have to move more drastically to curtail consumer prices, spooking investors. The S&P 500 is now on track for its worst weekly performance since mid-January.
“Inflation is currently in the public eye, it has become a political question,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers. “This is something that is concerning us, we have a rising risk of monetary policy mistakes. This is the number one risk we see in 2022.”
The yield on the benchmark 10-year Treasury note climbed to 2.036%, before easing to 1.996%. It rose above 2% Thursday for the first time since mid-2019. Yields rise when prices fall. Shorter-dated bonds also continued selling off, with the two-year yield rising to 1.616%.
“The move is coming as the number of expected rate hikes this year rises. We’re in a process where the Fed is catching up to the market,” said Sebastien Galy, a macro strategist at Nordea Asset Management.
Cryptocurrencies edged down for a second consecutive day. Bitcoin slipped 1.1% from its level at 5 p.m. ET Thursday, trading at around $43,250. It has risen over 12% in February.
Earnings season is ongoing, with private-equity firm Apollo Global Management, utility company Dominion Energy and steel producer Cleveland-Cliffs set to post earnings before markets open. Meanwhile, the University of Michigan’s consumer sentiment gauge for February is due at 10 a.m. ET.
International stock indexes largely followed U.S. markets lower. The pan-continental Stoxx Europe 600 slipped 1.1%. Mercedes-Benz shares rose over 2% after the auto maker put out preliminary results that beat expectations.
In Asia, the Shanghai Composite Index fell 0.7%, while Hong Kong’s Hang Seng Index ticked down 0.1%. Markets in Japan were closed for a public holiday.