5 things to know before the stock market opens Wednesday

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5 things to know before the stock market opens Wednesday

The U.S. equity futures rose and Asian stocks looked set for a muted start Wednesday as traders weighed Federal Reserve Chair Jerome Powell's comments that officials should consider a faster removal of stimulus.

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Australian shares fell while contracts for Japan and Hong Kong pointed to a cautious open. The S&P 500 fell by almost 2% overnight and equity volatility jumped on the prospect of tightening monetary policy. The gap between yields on 5 year and 30 year U.S. Treasuries has shrunk since March last year.

Powell said that the next Fed meeting should look at whether to wrap up bond purchases a few months ago and retire the word transitory to describe high inflation. That could open the door to earlier interest-rate hikes. Money markets have close to 60 basis points of increases priced in by the end of 2022.

Crude oil suffered a tumble and gold held a drop.

There have been pulses of volatility across markets because of the uncertainty surrounding monetary policy support and the still uncertain risks for global reopening from the new virus variant. The yield-curve shift could be taken as evidence of economic challenges ahead.

Liz Ann Sonders, chief investment strategist at Charles Schwab Co., said on Bloomberg Television that the flattening curve doesn't suggest imminent doom for the equity market. She recommended watching the lower quality-corporate bond spreads to gauge sentiment, as well as alarm bells go off in terms of recession when the curve gets closer to inverting.

The debt ceiling is back on the radar as is the ongoing issue of raising or suspending the U.S. debt ceiling. There's a chance that the U.S. will run out of borrowing capacity by the end of the year, as evidenced by the increased yields on Treasury bills maturing in late December.

Before the latest virus and policy concerns flared, Beijing s crackdown on private enterprises and contagion fears from China Evergrande Group's debt crisis were already roiling its markets.

For more market analysis, read our MLIV blog.

Some of the biggest moves in markets are:

No S&P 500 futures increased by 0.5% at 9: 14 a.m. in Tokyo. The S&P 500 fell 1.9%.

No Japanese yen was at 113.23 per dollar.

The offshore yuan was at 6.3669 per dollar None The yield on 10 year Treasuries fell five basis points to 1.44%

None of the golds was at $1,775. 19 an ounce

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