Sara SjolinWall Street looked set for another day of market carnage on Monday, as fears the Federal Reserve will soon raise interest rates continued to spook investors out of risky assets, such as equities.
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.
Futures for the Dow Jones Industrial Average YMZ6, -0.64% slid 114 points, or 0.6%, to 17,853, while those for the S&P 500 index ESZ6, -0.65% dropped 13.25 points, or 0.6%, to 2,102.75. Futures for the Nasdaq-100 index NQZ6, -0.81% lost 33.25 points, or 0.7%, to 4,634.50.
Fed jitters: The sharp declines follow a brutal session on Wall Street on Friday, when the Dow average 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.
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“Previous falls have seen a wave of liquidity move into the market to buy on any weakness, but the volume of concerns — in particular in relation to central bank support — is making it far more difficult for investors to simply brush off this latest downturn as an opportunity rather than a threat,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor, in a note on Monday morning.
“The major hope for investors rests with the Fed’s resident dove, Lael Brainard, whose speech today takes on even more significance, amid hopes that she will maintain her dovish stance and ease market fears for next week’s Federal Reserve meeting,” she added.
Brainard is due to speak at the Chicago Council on Global Affairs at 1:15 p.m. Eastern Time.
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Atlanta Fed President Dennis Lockhart will give a speech on monetary policy to the National Association for Business Economics in Atlanta at 8 a.m. Eastern. Later, Minneapolis Fed President Neel Kashkari’s speaks at the St. Paul BOMA’s Thought Leader Seminar at 1 p.m. Eastern.
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, +15.94% also spiked on Friday, surging 34% to above 16, marking its biggest one-day move since the U.K.’s Brexit vote in June. The index continued to rise on Monday, up 14% to 19.87.
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