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U.S. stock futures pointed to deeper losses at Thursday’s open as investors reeled from shock inflation data that renewed worries over aggressive Federal Reserve action and digested earnings from some of Wall Street’s big banks.
Futures tied the S&P 500 dropped 1.4% in pre-market trading, and the Dow Jones Industrial Average shed 470 points, or 1.5%. Contracts on the tech-heavy Nasdaq fell 1%.
The moves come after all three major indexes tumbled Wednesday following fresh CPI data that showed prices across the U.S. economy surged at the fastest pace since 1981.
Also on the economic data front, initial jobless claims again edged higher last week in a potential sign the labor market may be cooling as the Federal Reserve tightens financial conditions. First-time filings for unemployment insurance in the U.S. increased to 244,000 in the week ended July 9, up by 9,000 from the prior period, Labor Department data showed Thursday morning. Economists surveyed by Bloomberg had expected the latest figure to come in at 235,000.
JPMorgan Chase (JPM) was in the spotlight early Thursday after reporting a wider-than-expected drop in second-quarter profit of 28%, attributing the decline to a $1.1 billion in provision for credit losses amid concerns over a possible economic downturn. Shared slid as much as 4% following the results.
“In our global economy, we are dealing with two conflicting factors, operating on different timetables,” CEO Jamie Dimon said, “The U.S. economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy.”
“But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road.”
Morgan Stanley (MS) revealed results that missed analyst expectations, dragged down primarily by a slump in investment banking revenue due to volatile market conditions. Shares stumbled as much as 2.6% in the early trade.
The earnings weighed on the broader financial sector, sending shares of bank peers Citi (C) and Wells Fargo (WFC) down by 1.4% and 1.3%, respectively, pre-market ahead of their own earnings on Friday.
Meanwhile, commodity markets remained under pressure on rising worries of a supply crunch. West Texas Intermediate (WTI) crude futures fell by $2.24, or 2.33% to $94.06 per barrel in the early trade, and Brent Crude Oil fell by $1.94, or 1.95%, to $97.63.
The Bureau of Labor Statistics’ Consumer Price Index showed a year-over-year increase of 9.1% last month, up from the prior 40-year high of 8.6% in May. “Core” CPI, which excludes the more volatile food and energy components, rose 5.9% in June, compared to 6.0% in the prior reading.
“Markets had a knee-jerk reaction after the eye-popping inflation numbers and the headline number of 9.1% only makes the job that much harder for the Fed,” Allianz Investment Management Senior Investment Strategist Charlie Ripley said. “As a result, the Fed is likely going to send a hawkish message at the July meeting, and it would be a mistake to think that a rate hike less than 75 basis points is in the cards.”
The blowout headline figure even spurred a wave of speculation among strategists that an increase of 100 basis points may now be on the table — a move that would mark the most combative monetary intervention since the early 1990s.
“Everything is in play,” Atlanta Fed President Raphael Bostic told reporters in St. Petersburg, Florida on Wednesday. When asked if that included lifting interest rates by a full percentage point, he said, “it would mean everything.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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