U.S. stock futures were soft on Monday due to higher bond yields and a rampant dollar depressed sentiment.
The Dow Jones Industrial Average DJIA fell 107 points, or 0.35%, to 30077, the S&P 500 SPX declined 32 points, or 0.84%, to 3758, and the Nasdaq Composite COMP fell 153 points, or 1.37%, to 11067. The Dow Jones Industrial Average was down 18.6% for the year to date, and was at a fresh 52 week low.
Wall Street flirting with a fifth day of losses as concerns about rising borrowing costs and a surging dollar continued to pressure risk assets, according to futures.
The benchmark S&P 500 has lost 22.5% this year, after the Federal Reserve stressed it would hike interest rates aggressively to dampen inflation near 40 year highs.
The dollar index DXY, started the week by topping 114, its highest level since 2002, and the 10 year Treasury yield TMUBMUSD 10 Y, which began the year around 1.65%, was offering 3.77%.
Concerns about the possibility of a global recession is weighing on equity markets as well as the ongoing flight of the dollar. Richard Hunter, head of markets at Interactive Investor, said that the risk of a hard landing for economies after a period of over-tightening is getting higher.
There are sharp moves in the currencies and fixed income of countries with concerns about fiscal imprudence that add to the general market angst.
In Asian trading the U.K. pound GBPUSD hit a record low against the buck of $1.04 after investors reacted negatively to last week s debt-funded tax-slashing budget. It later recovered but 10 year gilt yields TMBMKGB 10 Y, surged 31 basis points to 4.140%. Italian 10 year government bond yields TMBMKIT 10 Y, hit a nine year peak above 4.4% after a far-right coalition won the country s election.
Jonathan Krinsky, chief market technician at BTIG, asked if the S&P 500 s SPX retreat back towards the June lows should attract investors.
It is hard to ignore concerns about the longer-term implications because of the acceleration in the dollar, global yields, and breakdowns across global FX. Krinsky wrote in a note that the good news is that we are closer to a tradable bottom in the near-term than we were at 3,900.
Despite bearish sentiment and positioning much of the year, it is the transactional indicators that have been lacking for true capitulation. Krinsky said that several of them are at or near levels that suggest a bounce should be forming soon, especially as the seasonals become a tailwind in mid-October.
Technical factors may support stocks for the short term. Krinsky noted that the 200 week average of 3,585 may provide a floor.
The S&P 500 s 14 day relative strength index, a closely watched momentum gauge, dropped below 25 according to CMC Markets, where a reading south of 30 is considered oversold.
Option markets are pointing to a heightened pessimism that may prove attractive to contrarian traders. The Wall Street's fear gauge, the CBOE Vix index VIX, has moved up to a three month high around 32, and large money managers have spent $34.3 billion on put options for stocks and ETFs over the past four weeks, the most since the data started in 2009, according to the Financial Times.
There are a number of regional Fed president speakers on the slate for Monday. Boston s Susan Collins talks at 10 a.m. Atlanta s Raphael Bostic takes the mic at 12 noon, Lorie Logan of Dallas speaks at 12: 30 p.m. and Cleveland s Loretta Mester will deliver some words at 4 p.m.