U.S. stock futures pointed to deeper losses at the open on Thursday as investors reeled from shock inflation data that renewed concerns about aggressive central bank action and awaited earnings from Wall Street’s biggest financial institutions.
S&P 500 futures fell 1.4% in premarket trading, and the Dow Jones Industrial Average fell 470 points, or 1.5%. Contracts on the tech-heavy Nasdaq fell 1%.
The moves come after all three major indexes fell on Wednesday following fresh consumer price index data that showed prices in the US economy rose at the fastest pace since 1981.
Also on the economic data front, initial jobless claims rose again last week, a potential sign that the labor market may be cooling as the Federal Reserve tightens financial conditions. US jobless claims rose by 9,000 from the previous week to 244,000, Labor Department data showed on Thursday morning. Economists polled by Bloomberg had expected the latest figure to be 235,000.
JPMorgan Chase ( JPM ) was in the spotlight early Thursday after it reported a bigger-than-expected 28% drop in second-quarter profit, attributing a $1.1 billion drop in loan loss provisions to concerns about a possible economic downturn. Shared fell by as much as 4% after the results.
“In our global economy, we’re dealing with two conflicting factors, operating on different timings,” said CEO Jamie Dimon, “The US economy continues to grow, and the labor market and consumer spending and spending power remain healthy. “
“But geopolitical tension, high inflation, declining consumer confidence, uncertainty about how high rates must go and unprecedented quantitative tightening and its effect on global liquidity, combined with the war in Ukraine and its damaging effect on global energy and it is very likely that food prices will have a negative impact on the global economy at some point.”
Meanwhile, commodity markets remain under pressure from growing concerns about a supply crunch. West Texas Intermediate (WTI) crude futures were down $2.24, or 2.33%, at $94.06 a barrel in early trade, and Brent crude was down $1.94, or 1.95% , to $97.63.
The Bureau of Labor Statistics’ consumer price index showed a 9.1% year-over-year increase last month, up from the previous 40-year high of 8.6% in May. “Core” CPI, which excludes volatile food and energy components, rose 5.9% in June, compared with 6.0% in the previous reading.
“The markets had a shock reaction after the stunning inflation number, and the headline number of 9.1% only makes it harder for the Fed,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “As a result, the Fed is likely to send a hawkish message at the July meeting, and it would be a mistake to think that a rate hike of less than 75 basis points is on the cards.”
The headline figure even fueled a wave of speculation among strategists that a 100 basis point hike could now be on the table – a move that would mark the most combative monetary intervention since the early 1990s.
“It’s all in the game,” Atlanta Fed President Raphael Bostic told reporters Wednesday in St. Louis. Petersburg, Florida. Asked if that included raising interest rates by a full percentage point, he said: “that would mean everything.
Aleksandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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