U.S. stock futures sank Wednesday as news that Federal Reserve Chairman Jerome Powell signaled an appetite for gradual interest rate hikes sapped optimism over the economic recovery.
Futures prices for the S&P 500 Index, the Dow Jones Industrial Average and the Nasdaq-100 Index have all fallen 0.1% and 0.3%, respectively, in early trading. Volume has lightened up so far this morning, with just 856,000 contracts traded on the Nasdaq-100 Index and 258,000 on the S&P 500.
Rising interest rates in the wake of a strong first-quarter earnings season and a rise in the cost of U.S. Treasuries triggered a slide in stocks Tuesday as the Dow dropped more than 700 points to trade below the 25,000 mark for the first time since May 18.
“The momentum of this advance appears to have lost its momentum,” Powell said in a speech in Cleveland. “Price-level increases should prove to be transitory.”
The S&P 500 closed Tuesday above a support level set in late April but is still more than 5% below a record high reached a month ago.
Tuesday’s pullback followed days of weak earnings reports. Growth-oriented shares such as Amazon and Walmart led Tuesday’s selloff and left the Nasdaq-100 Index more than 5% below a peak of 7,556 hit on May 15.
On Wednesday, Amazon was down 1.7% and Walmart fell 0.8%.
Tech stocks were also hit hard. International Business Machines, which reported a quarterly revenue decline for the first time in three years, was off 1.6% in premarket trading. Shares of Tesla were also down 0.5% after the electric car company said its shares were downgraded to “underperform” at Morgan Stanley.
Apple shares were trading 0.8% lower in premarket trading despite its second-quarter earnings results beating expectations.
Bitcoin prices have also dropped in recent days to trade near a two-month low. Bitcoin was last trading down about 2.8% to trade for $4,455.27.
Uncertainty over whether the U.S. Government shutdown will resolve before June 30 and waning optimism about Greece’s debt will also likely keep a lid on investor sentiment in the near term.
Following Powell’s speech, futures prices for the benchmark 10-year Treasury were little changed at 3.0%. Yields rose to their highest since late March on Tuesday after a Treasury auction raised $24 billion.
The yield on the 10-year notes was trading at 2.824% on Wednesday, below Tuesday’s close of 2.831%.