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Inflation (Economics)

US Equity Futures Plunge as Recession Fears Mount Following Hot Inflation Data

Strategic Insights

— 2 min read

US equity futures fell sharply lower on Monday, driven by the Federal Reserve's likely path to faster and deeper rate hikes following last week's hotter-than-expected inflation data. The surge in energy and food prices, as well as rising rent and used car components, has economists worried that inflation dynamics are unlikely to ease in the coming months. The University of Michigan's benchmark reading of consumer sentiment plunged to an all-time low, while the CME Group's FedWatch tool now suggests a 23.6% chance of a surprise 75 basis point rate hike, up from 3.1% a week ago.

Key Takeaways:

  • US equity futures plummeted lower on Monday, with the Dow Jones Industrial Average futures indicating a 530-point opening bell slump, and S&P 500 futures priced for an 83-point decline.
  • The CME Group's FedWatch tool now suggests a 23.6% chance of a surprise 75 basis point rate hike, up from 3.1% a week ago.
  • The University of Michigan's benchmark reading of consumer sentiment fell to an all-time low, amidst growing recession fears.
  • The surging dollar pushed oil markets lower, with US gas prices hitting the highest nominal cost on record, a 63% increase from the same period last year.
  • The Biden Administration is looking to work with oil companies to reduce the refining backlog and manage gas prices, while reports suggest President Joe Biden will visit Saudi Arabia next month to meet with Crown Prince Mohammed bin Salman.
  • The surging dollar also hammered cryptocurrency prices, with Bitcoin falling 12.1% to $23,952.65, a move that extends its year-to-date decline to around 47.4%.
  • Cryptocurrency lender Celsius Network froze withdrawals from its deposit base due to the significant price movements.

Statistics:

  • US consumer prices rose by the fastest annual pace in more than four decades last month, with a 9.1% year-over-year increase, according to the Commerce Department.
  • The 10-year Treasury bond yields surged to 3.231%, while 2-year notes hit 3.21%, the highest since 2007, causing a brief inversion of the yield curve.
  • The national average price for a gallon of gas was pegged at $5.014 on Sunday, the highest nominal cost on record, a 63% increase from the same period last year.
  • Bitcoin prices were last seen 12.1% lower on the session at $23,952.65, a move that extends its year-to-date decline to around 47.4%.
  • The US dollar reached a near 20-year high of 104.75 against a basket of its global peers, putting downward pressure on oil markets.

Sources:

  • The Street - "5 Things You Must Know Before Market Opens Monday"
  • CNN - White House economic adviser Cecelia Rouse's comments on gas prices
  • The Street - "Bitcoin Crashes Below $24,000 as Celsius Network Freezes Withdrawals"

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