Stock futures slip on U.S. Federal Reserve’s hawkish pivot over rampant inflation

U.S. stock index futures declined on Friday as bond yields rose and growth stocks like Apple came under pressure after Federal Reserve Chair Jerome Powell’s speech signaled a hawkish pivot for the central bank in an attempt to more quickly to combat rampant inflation at more than 40-year highs.

Reuters:

Powell on Thursday backed moving more quickly to combat inflation and said a 50 basis point (bps) increase would be “on the table” when the Fed meets in May, resulting in the tech-heavy Nasdaq ending the session down more than 2%.

In premarket trading, megacap growth stocks Apple Inc and Microsoft Corp edged lower, while Alphabet Inc and Amazon.com Inc were muted, as investors fretted about impact of the higher-rate environment.

Traders now see a 88.2% chance of 50 bps hike at Fed’s May meeting and a 11.8% probability of a 75 bps increase.

The prospect of a more hawkish Fed has led to a rocky start to the year for equities, and in particular tech and growth shares whose valuations are more vulnerable to higher bond yields.

The Nasdaq has fallen 15.9% so far this year compared with a 7.8% decline in the benchmark S&P 500.

MacDailyNews Take: Nobody should be surprised about 50 basis point increases.

‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021

Earlier this year, Interactive Brokers founder Thomas Peterffy said, “Inflation is 7% — 1% or 2% [in interest rate hikes] doesn’t mean anything. If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”

Inflation is repudiation. — Calvin Coolidge

When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill. And when government does it for 40 years, the bill comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident. — Ronald Reagan

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