Stocks wobbled on Friday, as investors awaited the release of key U.S. inflation data ahead of a meeting of the Federal Reserve next week on monetary policy.
Futures for the Dow Jones Industrial Average retreated 30 points, or 0.1%, after the index dropped 638 points on Thursday to close at 32,272. S&P 500 futures signaled a start 0.1% lower with the tech stock-heavy Nasdaq poised to open 0.1% higher; the S&P 500 and Nasdaq declined 2.4% and 2.8% on Thursday, respectively.
Overseas, the pan-European Stoxx 600 lost 1.3% and Tokyo’s Nikkei 225 moved 1.5% into the red.
Investor attention continues to be dominated by inflation and the risk of recession. Central banks including the Federal Reserve have been acting aggressively to tame inflation at a multidecade high by tightening monetary policy. The risk is that a spate of interest-rate increases and a reduction in the Fed’s bondholdings could dent economic demand to the point of causing a recession.
“Inflation is what is scaring the horses on financial markets,” said Susannah Streeter, an analyst at broker Hargreaves Lansdown .
Markets will get a further sense of the Fed’s pathway before the central bank meets over policy next week with the release of U.S. consumer price index (CPI) data for May. Expectations are for CPI to have risen 8.2% year-over-year last month.
“It’s the anticipation of the bleak scenario which this data is set to reveal which is causing this fresh jump of anxiety,” said Streeter. “There are expectations the Federal Reserve may have to pull more tightly on the reins to slow it down.”
A hotter-than-expected inflation reading could prompt a fresh selloff by adding pressure on the Fed to act more aggressively, while a lower print—or signs that inflation has peaked—could see a stock market bounce.
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