1. S&P 500 poised to return to bear market, futures plummet
U.S. stock futures fell on Monday after Wall Street’s worst week since January. Bond yields soared as investors braced for a rate hike by the Federal Reserve later in the week as investors braced for better-than-expected consumer inflation data on Friday. The Dow Jones Industrial Average is expected to open 500 points or 1.7% lower on Monday, continuing its correction phase. The S&P 500 and Nasdaq were likely to open down 2% and 2.7%, respectively, before the indexes returned to bear territory and tested this year’s low of 3,810.32 last month. The Nasdaq has been in a bear market since March.
2. Bond yields rise more than stocks on fears of deepening recession
The 2-year U.S. Treasury yield hit its highest level since 2007 on Monday, rising 3.16%. The 2-year yield briefly reversed, rising above the 10-year for the first time since April. The so-called inverted yield curve is an indicator of a recession. The yield on the benchmark 10-year Treasury note later rose to 3.26%. The yield on the 5-year Treasury note is around 3.4%, higher than around 3.3% on the 10-year and 30-year bonds. Short-term yields have been volatile in the near term due to higher sensitivity to Fed rate hikes.
3. The Fed is expected to raise rates by 0.5% this week, but the market wants more
The Fed is expected to hold its June meeting on Tuesday and Wednesday and is expected to raise rates by 0.5%. Anything else would come as a surprise, but markets believe central bankers need to become more aggressive to curb inflation. The Fed is in the throes of trying to cool off by tightening monetary policy while trying not to tip the economy into recession. Ahead of the Fed’s policy decision, Wall Street will focus on Tuesday’s PPI and Wednesday’s retail sales data to put into context last week’s red-hot CPI report.
4. Bitcoin falls below $24,000 as the entire crypto market sells off
Bitcoin tumbled 14% on Monday to below $24,000, hitting its lowest level since December 2020, as investors dumped cryptocurrencies amid a broader sell-off in risk assets. Also concerning is that a crypto lending company called Celsius has suspended payments for its clients. The value of the entire cryptocurrency market fell below $1 trillion over the weekend and Monday morning for the first time since February 2021, according to CoinMarketCap. Crypto markets have also been on edge since mid-May, when the so-called algorithmic stablecoin TerraUSD and its sister coin Luna crashed.
5. First post-SPAC EV maker files for bankruptcy
Electric vehicle startup Electric Last Mile Solutions announced Sunday night that it plans to file for Chapter 7 bankruptcy protection through a special-purpose acquisition company merger less than a year after going public. ELMS’s IPO in late June 2021 comes amid a wave of SPAC deals taking the electric car maker public. The company is the first of these post-SPAC EV makers to announce that it will file for bankruptcy. Chairman and founder Jason Luo and then-CEO Jim Taylor left the company in February after an internal investigation found the company’s previous financial statements were unreliable.