Here are the most important news, trends and analysis that investors need to start their trading day:
Futures plunge, with S&P 500 poised to fall back into a bear marketSoaring bond yields slam stocks as concerns about a recession mountThe Fed is expected to hike rates 0.5% this week, but markets want moreBitcoin tumbles below $24,000 as the entire crypto market sells offThe first post-SPAC electric vehicle maker declares bankruptcy
1. Futures plunge, with S&P 500 poised to fall back into a bear market
U.S. stock futures sank Monday after the worst week on Wall Street since January. Bond yields soared as investors braced for the Federal Reserve to increase interest rates later this week following Friday’s hotter-than-expected consumer inflation data. The Dow Jones Industrial Average is set to open down 600 points, or 2%, on Monday, sinking further into a correction. The S&P 500 and the Nasdaq look set to open down 2.5% and 3%, respectively, with the former tracking to enter bear market territory again and test this year’s low of 3,810.32 last month. The Nasdaq has been mired in a bear market since March.
2. Soaring bond yields slam stocks as concerns about a recession mount
The 2-year Treasury yield on Monday hit its highest level since 2007, trading around 3.2%. At one point, the 2-year yield briefly inverted and went above its 10-year counterpart for the first time since April. A so-called yield curve inversion is seen as an indicator of a recession. The benchmark 10-year yield later popped to 3.26%. The 5-year yield at around 3.4% was higher than the 10-year and the 30-year at roughly 2.28%. Short-term yields have moved more in the last few days because of their higher sensitivity to Fed rate hikes.
3. The Fed is expected to hike rates 0.5% this week, but markets want more
The Fed is set to hold its June meeting on Tuesday and Wednesday, with a 0.5% rate increase expected. Anything more than that would be a surprise, but there has been a belief in the markets that central bankers are going to have to get even more aggressive to quell inflation. The Fed is in a tough spot, trying to cool things off with tighter monetary policy while trying not to tip the economy into a recession. Ahead of the Fed’s policy decision, Wall Street will look to Tuesday’s producer price index release and Wednesday’s retail sales data to put last week’s hot consumer inflation report in context.
4. Bitcoin tumbles below $24,000 as the entire crypto market sells off
Bitcoin tumbled 14%, to below $24,000 on Monday, hitting its lowest level since December 2020, as investors dump crypto in a broader sell-off in risk assets. Also sparking fears, a crypto lending company called Celsius has paused withdrawals for its customers. Over the weekend and into Monday morning, the value of the entire cryptocurrency market dropped below $1 trillion for the first time since February 2021, according to data from CoinMarketCap. The crypto market has also been on edge since mid-May when the so-called algorithmic stablecoin terraUSD and its sister coin luna collapsed.
5. The first post-SPAC electric vehicle maker declares bankruptcy
EV start-up Electric Last Mile Solutions said late Sunday it plans to file for bankruptcy protection less than a year after it went public via a merger with a special purpose acquisition company. ELMS’ public offering, in late June 2021, came amid a wave of SPAC deals that took EV makers public. The company is the first of those post-SPAC electric vehicle makers to say that it will declare bankruptcy. In February, Chairman and founder Jason Luo and then-CEO Jim Taylor left after an internal investigation found that the company’s past financial statements were unreliable.