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U.S. stock futures fell again on Wednesday, potentially extending Wall Street's slide to a third straight session, as central bank officials continue to reject market expectations of deep interest rate cuts in the coming months.
stocks closed lower on Tuesday, trimming the S&P 500's January gain to just 0.29%, while Treasury yields rose in reaction to comments from Federal Reserve Governor Christopher Waller, who He emphasized the need for patience in monitoring the trajectory of inflation.
“We can take our time to make sure we get this right,” Waller said at an event in Washington, adding that having to reverse course and raise rates later in the year would cause more damage than waiting.
A faster-than-expected reading of UK inflation during the month of December, which accelerated for the first time in 10 months, as well as tougher warnings from European Central Bank officials at the World Economic Forum in Davos, are testing the market consensus. for six Fed rate cuts this year.
Benchmark 10-year Treasury bond yields last rose 2 basis points (0.02 percentage point) from yesterday's close at 4.064%, while 2-year bonds rose 3 basis points to 4.281%.
The US dollar index, which tracks the greenback against a basket of six global currencies, extended its recent winning streak to trade at a five-week high of 103.408.
Traders are also reducing bets on a rate cut in March, with CME Group's FedWatch tool now suggesting a 59.5% chance of a quarter-point reduction in the federal funds rate, versus around 65% at the end of last week. The federal funds rate is currently between 5.25% and 5.5%.
The reassessment of interest rate risks also sent the market's key volatility indicator, the VIX index, up almost 10% in the overnight session to a two-week high of $14.60.
Heading into the trading day on Wall Street, futures contracts tied to the S&P 500 indicate an opening drop of about 16 points ahead of December retail sales data, expected at 8:30 a.m. ET
Meanwhile, futures linked to the Dow Jones Industrial Average are priced for a drop of 115 points, while those linked to the technology-focused Nasdaq indicate a pullback of around 70 points.
In overseas markets, Chinese stocks extended their declines from recent five-year lows following disappointing GDP data. The report showed the world's second-largest economy grew 5.2% last year but an uneven post-Covid recovery persisted, including a volatile real estate sector and muted domestic demand.
The MSCI index excluding Japan fell 2.2% at the close of trading, followed by a 0.4% drop in the Nikkei 225 in Tokyo.
In Europe, the Stoxx 600 fell 1.23%, largely tracking Wall Street futures, in early Frankfurt trading, while Britain's FTSE 100 fell 1.67% as the pound rose to 1.268 against the dollar.
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