U.S. stock futures were flat ahead of overnight trading Wednesday following a hawkish readout of minutes from the Federal Reserve’s last policy-setting meeting that hinted officials were poised to intervene more aggressively to curb inflation, sending the major indexes tumbling in the earlier session.
Futures tied to the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite hugged the flatline in extended trading after a two-day losing streak for the benchmarks. The tech-heavy Nasdaq, which began the week with a 2% pop, capped its second consecutive session of 2.2% losses. Meanwhile, the 10-year Treasury yield spiked to yield 2.6% — the highest level in three years.
Conversations detailed in the March 15-16 Fed meeting minutes released Wednesday suggested policymakers will soon begin to unwind the central bank’s $9 trillion balance sheet, including $4 trillion in asset purchases amassed to calm markets after the pandemic hit in early 2020. The minutes also indicated many participants in the Federal Open Market Committee (FOMC) “would have preferred a 50 basis point increase” in benchmark interest rates in March, when the Fed raised rates for the first time since 2018.
“When those minutes were actually released this afternoon, I think what you really saw was the solidification around the news that the Fed is very intent on combating inflation,” U.S. Bank senior vice president Lisa Erickson told Yahoo Finance Live.
Economists at Bank of America, which recently modified its Fed call to include 50 basis point rate hikes in June and July, said in a Wednesday note the newly released minutes show enough evidence to tip the scales towards a double bump increase in May.
“The reality is we are in uncharted waters here and the Fed has a difficult task in unwinding the tremendous monetary support over the past couple years,” Allianz Investment Management senior investment strategist Charlie Ripley said in a note. “Against this backdrop, it is highly conceivable that uncertainty in the path of monetary policy will remain embedded in markets and that is exactly what we have been witnessing with the recent moves in interest rates and risk assets.”
Other headwinds investors have to continue to navigate are developments in the Russia-Ukraine war. The United States imposed another round of sanctions on Wednesday that included a ban on American investments in Russia. The penalties also targeted Russia’s Sberbank and Alfabank, two of the country’s largest financial institutions, as well as President Vladimir Putin’s two adult daughters, Russian Foreign Minister Sergei Lavrov’s wife and daughter, and senior members of Russia’s security council. Missing from the latest punitive measures, however, were energy transactions.
Meanwhile, testifying before the House Financial Services committee on Wednesday, U.S. Treasury Secretary Janet Yellen warned that Russia’s war in Ukraine will stoke “enormous economic repercussions around the world,” including disruptions to the flow of food and energy.
Yellen also said that Russia should be expelled from the Group of 20 major economies forum, and the U.S. will boycott “a number of G20 meetings” if Russian officials participate.
6:13 p.m. ET Wednesday: Futures muted after two-day losing streak
Here’s where markets were trading ahead of the overnight session on Wednesday:
S&P 500 futures (ES=F): -3.00 points (-0.07%) to 4,472.75
Dow futures (YM=F): -29.00 points (-0.08%) to 34,370.00
Nasdaq futures (NQ=F): -1.00 points (-0.01%) to 14,504.25
Crude (CL=F): +$1.52 (+1.58%) to $97.75 a barrel
Gold (GC=F): +$5.00 (+0.26%) to $1,928.10 per ounce
10-year Treasury (^TNX): +5.3 bps to yield 2.6090%
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc