Stock futures open lower to steady after gains

Stock futures opened slightly lower Tuesday evening after rising during the regular trading day, as investors contemplated the potential for the Federal Reserve to take an even more aggressive to reining in inflation.

Contracts on the S&P 500 edged lower. The index rose more than 1% during Tuesday’s regular session after sliding on Monday. Technology stocks outperformed, and the Nasdaq Composite rose by nearly 2%.

US stocks rose for a fifth time in six sessions on Tuesday as investors shook off volatility following Fed Chair Jerome Powell’s hawkish remarks from earlier this week. Speaking at the National Association for Business Economics Conference on Monday, Powell said the central bank would take “the necessary steps to ensure a return to price stability,” and would be willing to raise the benchmark interest rate by more than 25 basis points at a forthcoming meeting if deemed necessary to curb fast-rising prices.

These remarks — which came less than a week since Powell’s last public remarks at the end of the Fed’s last policy-setting meeting last Wednesday — were taken as a surprisingly quick shift in tone, highlighting the urgency key policymakers saw in addressing inflation.

“My belief going in, prior to [Monday] had been that the Federal Reserve truly in their heart of hearts believed that inflation is transient in nature, and we will see it come down over the summer,” Jeff Klingelhofer, Thornburg Investment Management co-head of investments, told Yahoo Finance Live on Tuesday . “What we saw from Jerome Powell [Monday] is that his confidence is shaken.”

“If we have another high inflation print, I think the market will have to start pricing in the potential for 50 basis point rate hikes, even the potential for an inter-meeting hike, and a Fed that is truly scared of inflation being out of control,” he added.

The Fed last week raised interest rates for the first time since 2018, bringing the benchmark rate up by 25 basis points off near-zero levels. The Federal Open Market Committee (FOMC), as of last Wednesday, also telegraphed that its median member expected there would be another six quarter-point rate hikes this year.

Heading into this, stocks traded with heightened volatility throughout 2022 as investors priced in the potential that higher interest rates and otherwise tighter financial conditions would weigh on equity valuations. Uncertainty around the progression of Russia’s invasion in Ukraine has also remained a point of concern. Still, some strategists noted that investors have less to worry about at least in the near-term when it comes to the impact of the start of Fed hiking cycles.

“Equities tend to continue their upwards march in the nine months after the Fed begins to tighten, as the strong economy that enabled hikes supports growth,” Deutsche Bank strategists including Jim Reid, head of credit strategy and thematic research, wrote in a note. “After that, equities become more volatile and are more likely to experience a drawdown. Ten-year Treasury yields start increasing, sending their prices lower, but eventually flatten out and decline as markets put increasing probabilities on the next coming recession. should not be worried about near-term impacts.”

6:10 pm ET Tuesday: Stock futures open lower

Here’s where the major stock index futures opened Tuesday evening:

  • S&P 500 futures (ES=F): -2.25 points (-0.05%) to 4,402.75

  • Dow futures (YM=F): -10 points (-0.03%) to 34,699.00

  • Nasdaq futures (NQ=F): -12 points (-0.08%) to 14,642.00

NEW YORK, NEW YORK - MARCH 16: Traders work on the floor of the New York Stock Exchange (NYSE) on March 16, 2022 in New York City.  The Dow started off the day in positive territory, extending yesterday's rally.  (Photo by Spencer Platt/Getty Images)

NEW YORK, NEW YORK – MARCH 16: Traders work on the floor of the New York Stock Exchange (NYSE) on March 16, 2022 in New York City. The Dow started off the day in positive territory, extending yesterday’s rally. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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