Anora Mahmudova, Sara Sjolin
Traders were waiting for a speech by Fed dove Lael Brainard later in the day, hoping she could dispel concerns a rate increase is imminent.
Meanwhile, Atlanta Fed President Dennis Lockhart in a speech to the National Association for Business Economics in Atlanta said he thought the economic data over the past few weeks “warrant...serious discussion of a policy rate increase.”
Stock futures were off their worst levels but still lower. The Dow Jones Industrial Average futures YMZ6, -0.19% were off by 38 points, or 0.2%, to 18,002, while those for the S&P 500 index ESZ6, -0.13% dropped 3 points, or 0.2%, to 2,119. Futures for the Nasdaq-100 index NQZ6, -0.20% lost 10 points, or 0.2%, to 4,660.
Fed jitters: The sharp declines follow a brutal session on Wall Street on Friday, when the Dow industrials DJIA, -2.13% lost almost 400 points and the S&P 500 index SPX, -2.45% dropped 2.5% after hawkish Fed comments. Boston Fed President Eric Rosengren said a “reasonable case can be made” for raising interest rates, fueling expectations it will definitely happen this year. Both the Dow and the S&P plunged below their 50-day moving averages during Friday’s rout.
Read: Gundlach’s talk of a surprise Fed tightening set the stage for a stock, bond-market rout
“Should we continue to get a consistent hawkish message from policy makers ahead of the [Fed’s] blackout period, we could see the implied probability of a hike in September ramp up considerably which based on the moves since Friday, would be bad news for equity markets,” said Craig Erlam,
“The catalyst for this could once again come from Fed policy makers, with Lael Brainard, Neel Kashkari and Dennis Lockhart all scheduled to speak [today],” he added.
Investors are particularly waiting for Brainard’s speech, hoping she—as the Fed’s resident dove—will ease market fears that a rate increase is imminent.
“Further hawkish commentary and any indication that a rate hike is likely could trigger another wave of repricing for September and December, which in turn could see the dollar and Treasury yields on the rise again and equities coming under pressure,” Erlam said.
Brainard is due to speak at the Chicago Council on Global Affairs at 1:15 p.m. Eastern Time.
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Later, Minneapolis Fed President Neel Kashkari’s speaks at the St. Paul BOMA’s Thought Leader Seminar at 1 p.m. Eastern. Appearing on CNBC on Monday morning, Kashkari said there was no ‘huge urgency to do anything’.
After Monday, the Fed enters its “blackout” period ahead of its Sept. 20-21 policy-setting meeting.
The probability of a rate tightening at that meeting rose to 27% on Friday, from 18% on Thursday, following Rosengren’s comments, according to the CME’s Fed Watch Tool.
The CBOE Market Volatility Index VIX, +8.00% also spiked on Friday, surging 40% to above 16 around the time of the U.S. market close, marking its biggest one-day move since the U.K.’s Brexit vote in June. The index continued to rise on Monday, up 17% to 20.39.
Read: Investors brace for volatility after Friday stock-market rout
Bond selloff: Treasury prices fell further on Monday, pushing yields higher. The yield on the 10-year Treasury note TMUBMUSD10Y, +4.66% rose 1 basis point to 1.690%. The interest rate on the U.S. benchmark note on Friday climbed 5.7 basis points to 1.671%, its highest level since June 23, the day of the Brexit vote.
Hillary Clinton left a 9/11 ceremony in New York abruptly Sunday. Clinton's doctor released a statement saying the 68-year old had been diagnosed with pneumonia Friday.
Clinton health scare: Investors on Monday were also paying close attention to Democratic presidential candidate Hillary Clinton. Video footage showed her stumbling into her van after she left early from New York City’s ceremony marking the 15th year since the September 11th terrorist attacks.
Clinton’s doctor said she was diagnosed with pneumonia on Friday, but the incident has fueled concerns it will boost Republican presidential candidate Donald Trump’s campaign, which is seen as threatening financial markets.
Oil blues: Crude oil prices CLV6, -1.55% stumbled 2% to $44.94 a barrel after a rise in the Baker Hughes rig count last week added to concerns about an oversupply in the market. The slide weighed on U.S. major oil companies, with shares of Chesapeake Energy Corp. CHK, -1.55% off 2.5% ahead of the bell and Exxon Mobil Corp. XOM, -2.48% down 1%.
The VelocityShares 3x Long Crude ETN UWTI, -9.70% lost 7% premarket as well.
Movers and shakers: Shares of Tesla Motors Inc. TSLA, -1.46% fell 0.7% in premarket trade. The electric-car maker on Sunday announced an upgrade for its Autopilot feature that could significantly improve the safety if its semiautonomous driving system.
Praxair Inc. PX, -2.62% lost 1.7% ahead of the bell after the industrial-gas company and German peer Linde AG LIN, -7.13% said they have ended merger talks. Linde shares tanked 8%.
Perrigo Co. PLC PRGO, -2.19% climbed 3.6% after activist investor Starboard Value LP disclosed a 4.6% stake in the drugmaker.
Other markets: The dollar struggled for direction after its rally on Friday, with the ICE Dollar Index DXY, +0.02% edging up 0.1% to 95.414.
Silver SIZ6, -2.00% dropped 2.3%, while gold GCZ6, -0.41% moved 0.5% lower.
Stocks in Asia caught up with Friday’s rout in the U.S., dropping sharply across the board. It was the same story in Europe, where the Stoxx Europe 600 index SXXP, -1.48% gave up 1.5%.