US stocks mixed as Fed tightening fears linger

The US stocks were mixed Monday morning, with equities poised for more turbulence this week due to fears of Fed tightening and a wild run in currency markets.

The S&P 500 was near the same level as the Dow Jones Industrial was off by just 0.2%. The tech-heavy Nasdaq Composite gained 0.4%. The CBOE Volatility Index VIX, which measures Wall Street's expectations for short-term market volatility, went above 32, its highest level since June 17.

The move extends a vicious bout of selling spurred by fears that central bank policymakers may trigger a recession as they raise interest rates to fight decades-high inflation.

On Friday, the Dow Jones Industrial Average hit a 2022 low after recording a 4% loss for the week. The benchmark S&P 500 was down 4.6% over the same period, as it was near its June 16 low of 3,666. 77 as it closed at 3,693. The technology-heavy Nasdaq Composite posted a weekly loss of 5.1%.

Skittish action was prevalent across other parts of the market. The rate sensitive 2 year Treasury note surged above 4.28%, a fresh 15 year high, while the 10 year Treasury yield rose to 3.77%, the highest since 2011 on the bond side.

In commodities, the dollar index jumped to its highest level since May 2002, as Brent crude oil futures fell below $85 per barrel, the lowest since January.

Volatility across the Atlantic was in focus after the British pound's roller coaster action. After Britain s new government announced plans to issue its biggest tax cut in 50 years and boost spending, the currency plunged about 4% to around $1.03, hitting an all-time low against the U.S. dollar. The pound was able to climb back to $1.07 at the beginning of the day.

In a note from Susannah Streeter, Hargreaves Lansdown Senior Investment and Markets Analyst Susannah Streeter said that the tax giveaway, which gives higher earners the bigger tax break, will cause the interest to not only be at eye-watering levels, but also that the fires of inflation will be fanned further.

In the U.S., Wall Street strategists are expecting that a recession will be the Federal Reserve's base case scenario, as it proceeds with an aggressive rate hiking campaign in an effort to restore price stability, especially after Chair Jerome Powell warned of economic pain in a speech last week.

According to his remarks in a Sunday interview on CBS's Face the Nation, Atlanta Federal Reserve President Raphael Bostic continues to believe that he and his colleagues can mitigate inflation without harming the labor market. Bostic said that we're going to do all that we can at the Federal Reserve to avoid deep, deep pain. We are still creating lots of jobs on a monthly basis, and I think there is an ability for the economy to absorb our actions.