Stock Futures Slip, Signaling More Market Volatility

Tesla, Moderna, Nvidia shares fall premarket; Russia’s ruble declines as tensions rise over Ukraine

U.S. stock futures edged lower, signaling that the market’s bruising start to the year is set to continue, as investors prepared for a Federal Reserve meeting and tracked tensions between the West and Russia over the military buildup on the border with Ukraine.

Futures for the S&P 500 fell 0.3% Monday, after the benchmark index endured its third consecutive and biggest weekly drop since March 2020. Contracts for the technology-focused Nasdaq-100 lost 0.6% and Dow Jones Industrial Average futures edged down 0.2%. Stock futures can be volatile and don’t always indicate where indexes will land at the opening bell.

Ahead of the bell in New York, Tesla, due to file earnings Wednesday, lost 3%. Shares of Moderna and Pfizer each lost 3.5% premarket, while chip company Nvidia fell 2%. Kohl’s jumped 26% after a group backed by activist hedge fund Starboard Value offered roughly $9 billion to buy the department store chain.

In the bond market, the yield on 10-year Treasury notes slipped, falling to 1.738% from 1.747% Friday. Yields have risen this year as bond prices have fallen, a selloff that has rippled through financial markets by punishing speculative bets on stocks and cryptocurrencies that took off when the Fed rushed to stimulate the economy in the early  b of the pandemic

The losses continued early Monday. Bitcoin traded at about $33,623, down 8.4% from its 5 p.m. ET level on Friday. Cathie Wood’s Ark Innovation ETF, a big winner in 2020, fell 1.9% in premarket trading.

The biggest single factor driving yields up and stock prices down is the expectation that the Fed will raise interest rates multiple times in 2022 to rein in inflation, which is running at its fastest pace in 40 years. The central bank is set to gather for a two-day meeting Tuesday. At its conclusion on Wednesday, Chairman Jerome Powell is expected to signal that rates will likely rise as soon as March.

The central bank is concerned fast-rising consumer prices will become self-reinforcing by feeding into expectations of higher inflation, said Lyn Graham-Taylor, senior rates strategist at Rabobank. “It is talking about tightening aggressively to get on top of that.”

Mr. Graham-Taylor said he thinks inflation will fall this year and that the Fed won’t raise rates as many times as the market expects, pulling down 10-year government-bond yields

Fears of a possible Russian invasion of Ukraine also weighed on markets at the start of the week, analysts said. The State Department on Sunday instructed the families of U.S. diplomats in Ukraine to leave the country, while the White House is considering sending several thousand troops to Europe.

Sebastien Galy, senior macro strategist at Nordea Asset Management, said a conflict and possible consequences—including the closure of U.S. financial system to Russian banks—would play out in markets in unpredictable ways. “The closer you get to the cliff, the more nervous [the market] is,” Mr. Galy said. “We don’t have the information to trade.”

Russia’s ruble fell 1.8% to trade at about 79 to the dollar on Monday. The cost of insuring against a default by the Russian government rose, according to IHS Markit data.

In the U.S., earnings season continues, with results due from Halliburton, International Business Machines and Steel Dynamics on Monday, followed by General Electric, Microsoft, Apple and Tesla later in the week. About a fifth of companies on the S&P 500 have filed results, and 82% have beaten analysts’ expectations for earnings per share, according to FactSet.