Heavy selling of US equities in the latter part of yesterday’s session saw major indices tumble, with the DOW posting losses of over 850 points during the course of the day. With futures markets continuing to plot that downward trajectory overnight, the expectation is for more hefty losses at the opening bell. Critically investors are trying to understand what the driver is behind the nose-dive, but with US interest rates marching relentlessly higher, equity valuations are looking increasingly overblown. The US economy may be on a strong footing right now, but elsewhere there are signs of a slowdown and there’s a genuine sense building that a return to corrective territory could be on the cards.
Donald Trump has taken aim at the Federal Reserve in reaction to the news, but with the central bank bidding to keep inflation under control as US companies wallow in that surplus cash which has been repatriated from overseas in the wake of tax breaks, this was arguably a situation that was always going to happen. The DOW is still over 1,000 points above where correction territory starts, but with US inflation data due before the opening bell, anything looking too hot here will heap further pressure onto the Fed to keep tightening monetary policy into 2019 and in turn risk acting as a catalyst for fresh selling of stocks.
Ahead of the open we’re calling the DOW down 300 at 25299 and the S&P down 29 at 2757.
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