Here are five things you must know for Monday, August 22:
1. -- Stock Futures Slide On Growth, Inflation Worries
U.S. equity futures slumped lower Friday, while the dollar extended its best weekly gain in more than two years, as investors adopted a defensive tone ahead of a crucial week for the Fed amid concerns that soaring inflation will continue to cripple growth prospects in the world's biggest economies.
An energy crisis in Europe, which is threatening to turn the region into recession as the cost of living surges, alongside the damage to the world's second largest economy from China's 'zero Covid' health policies, have added to the muted investor sentiment.
China, which cut its benchmark 1-month loan prime rate last night in its latest effort to kick-start growth, is slipping closer to contraction as factory activity slows amid new pockets of infections in key cities. That's adding to supply-chain disruptions in everything from semiconductors to toys to clothes and shoes, which in turn ratchets up prices pressures for importers and accelerates inflation concerns heading into the winter months.
Last week's decline on Wall Street, which snapped a four-week winning streak, reflects not only concern for faster near-term inflation but also the uncertainty linked to a global slowdown - both of which will likely complicate the Fed's rate path between now and the end of the year.
At present, investors are divided on the size of the Fed's September rate hike, with bets on a 50 basis point move sitting at around 49.5% and the chances of a 75 basis point increase pegged at 50.5% ahead of Chairman Jerome Powell's key address at the Jackson Hole symposium later this week.
The dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.25% higher at 108.44 in overnight trading, extending last week's 1.2% gain and taking the foreign exchange benchmark to within touching distance of a 20-year high.
Benchmark 10-year note yields, which move in the opposite direction of prices, rose 2 basis points from yesterday to 2.946% while 2-year notes were pegged at 3.255%
European stocks slumped lower amid hawkish comments from Joachim Nagel, the head of Germany's Bundesbank, who said the European Central Bank won't be swayed by economic weakness as it lifts rates to fight the fastest inflation in more than 25 years.
Europe's Stoxx 600 benchmark fell 1.12% in early Frankfurt trading, following on from a 0.95% decline for the region-wide MSCI ex-Japan index in Asia.
On Wall Street, futures tied to the S&P 500 are indicating a 47 point opening bell decline while those liked to the Dow Jones Industrial Average are priced for a 285 point slump. Futures linked to the tech-focused Nasdaq are indicating a 195 point decline.
2. -- Week Ahead: Powell Set For Key Jackson Hole Address
Federal Reserve Chairman Jerome Powell's planned speech at the central bank's annual retreat in Jackson Hole, Wyoming this Friday is the undisputed highlight of a week in which investors are grappling to find direction in interest rate markets as the economy recovers and inflation pressures ease.
Powell's speech, at 10:00 am Eastern time, will likely provide the Fed Chair a chance to cement the central bank's thinking on interest rate hikes heading into the autumn months as bets on a 75 basis point move in September continue to fade - even as policymakers insist that inflation remains their single-largest concern with respect to the economy's ability to return to full stride.
Data from the Fed's preferred inflation gauge, the PCE Price index, will be published at 8:30 am Friday, with a second estimate of second quarter GDP growth slated for the same time on Thursday.
A light calendar of earnings this week includes updates from Nvidia (NVDA), Dollar Tree (DLTR), Dollar General (DG) and Gap (GPS).
3. -- Tesla Shares Slide As Musk Unveils FSD Price Hikes
Tesla (TSLA) shares moved lower in pre-market trading after CEO Elon Musk Tweeted Sunday that that price of full-self driving software for its clean-energy cars is about to rise by around 25%.
Musk said the cost of FSD will rise by by $3,000, to $15,000 per user, when the new version of the software is rolled out on September 5, although drivers who order the new 10.69.2 beta prior to that date will pay the old $12,000 price.
Tesla told investors in April that "the inflationary impact on our cost structure has contributed to adjustments in our product pricing, despite a continued focus on reducing our manufacturing costs where possible", and has since initiated layoffs in California while boosting prices for its Model S and Model Y sedans.
Musk said Tesla model prices were now at "embarrassing levels" during a call with investors on July 20, adding that "this is not a promise or anything, but I'm hopeful that at some point, we can reduce the prices a little bit."
Tesla shares were marked 2.63% lower in pre-market trading to indicate an opening bell price of $866.56 each.
4. -- AMC Entertainment Plummets As Cineworld Confirms Chapter 11 Bankruptcy Option
AMC Entertainment (AMC) shares plunged lower in pre-market trading after the movie theatre chain's largest rival, Cineworld, confirmed it's considering a Chapter 11 bankruptcy filing in the United States.
U.K.-based Cineworld, which owns Regal cinemas in the U.S., hit a record low on Friday after the Wall Street Journal reported the Chapter 11 option, which the group said Monday is one of its options as it looks to reduce debts accumulated during the pandemic and its failed takeover of Canada-based Cineplex.
Earlier this month, AMC posted a bigger-than-expected second quarter loss of 24 cents per share, on revenues of just over $1.1 billion, and planned to issue a special preferred share dividend that would carry the ticker symbol 'APE', a reference to retail stock traders that share information on the Reddit messaging board.
AMC shares were marked 33.25% lower in pre-market trading to indicate an opening bell price of $12.03 each.
5. -- Gas Prices Hit Late-February Lows As Oil Extends Declines
Global oil prices extended declines Monday, pulling U.S. crude prices firmly south of the $90 per barrel mark and taking domestic gas prices to the lowest levels in six months.
China's decision to cut its benchmark 1-month prime loan rate, when central banks around the world are tightening policy amid a global inflation surge, underscored the weakness Beijing's Covid policies have induced in the world's biggest energy market.
WTI crude futures for September delivery were marked $1.41 lower in overnight trading at $89.03 per barrel, while the Automobile Association of America pegged domestic U.S. gasoline prices at $3.905 per gallon, extending a run of 63 consecutive days of decline and taking prices back to the lowest levels since late February.
