Stock futures fall sharply ahead of inflation data closely watched by Fed

The U.S stock futures fell sharply on Thursday as traders anticipated the release of inflation data closely watched by the Federal ReserveFederal Reserve, and Wall Street braced for its worst first half of the year since 1970.

The Dow Jones Industrial Average DJIA went up 82 points, or 0.3%, to 31,029. The S&P 500 SPX lost 0.1% to 3,818. The Nasdaq Composite COMP was less than 0.1%, closing at 11,177. The action on Wednesday was choppy, leaving the CBOE Volatility Index VIX, a guage of expected equity market volatility, elevated at 28.2, compared to its long run average of around 20.

The S&P 500 was on course to take its losses by more than 20% for 2022. Since peaking near 4,800 in early January, the U.S. benchmark stock index has crumpled, due to investor fears that surging inflation is hurting consumer confidence and damaging the global economy.

What will be the next 1st half of the stock market after the worst 1st half since 1970? Sentiment has also been hit by Russia's invasion of Ukraine, a move that has heightened geopolitical angst and has resulted in a rise in energy and food prices.

In previous episodes of market tantrums, such as the 2020 COVID 19 sell-off, investors could look to central banks for help. With inflation in most major economies at their highest level in many decades, monetary guardians like the Federal ReserveFederal Reserve are stressing their commitment to tighten policy to dampen price pressures. Even if that means hurting growth and consequently, hurting corporate profits.

Federal Reserve Chairman Jerome Powell said on Wednesday that he sees a path back to 2% inflation, but warned there was no guarantee that we can do that. Stephen Innes, managing partner at SPI Asset Management, said he did not envision equities recovering until the U.S. rates market is pricing more meaningful cuts from the Fed.

He said that implied Fed pricing has gone from a peak of 4% to more like 3.50 over the last few weeks, but that is a ton of rate hike risk for the market to digest.

Powell will have a sharp eye on the data released ahead of the Wall Street opening bell. The PCE core price index for May, due at 8 : 30 a.m. Eastern Time, is one of the Fed s favorite price guides and may determine the pace at which the central bank raises interest rates.

Jobless claims numbers and consumer spending reports due at the same time should give you a clue whether households are suffering from higher inflation and the Fed tightening cycle.

The yield on the US 10 year Treasury TMUBMUSD 10 Y was down 5 basis points to 3.053%, reflecting a move into perceived havens. The BTCUSD fell below $20,000, where it was trading on Thursday due to deteriorating risk apetite.

The second quarter of company earnings season will kick into gear in the next few weeks, adding to trader anxiety. Recent reports from consumer-facing companies - such as Bed Bath Beyond BBBY -- have not been well received.

A survey of China's manufacturing sector showed that expansion was for the first time since March after COVID 19 restrictions were eased. The Shanghai Composite SHCOMP rallied 1.1% in response.

The mood in Europe was cautious, as traders tracked the fall in U.S. futures, with the Stoxx 600 SXXP shedding 1.5%.