US stock futures drop as wild volatility hits markets ahead of Fed meeting, while bitcoin attempts a recovery

US stock futures drop as wild volatility hits markets ahead of Fed meeting, while bitcoin attempts a recovery
Wall Street has been on a wild ride in 2022 so far.Xinhua News Agency/Getty Images
  • US futures fell Tuesday as investors looked towards the latest Fed decision, while bitcoin edged up.
  • Stocks swung dramatically on Monday as Fed policy, geopolitics and earnings panicked investors.
  • The Fed is expected to hike rates four times in 2022, but some analysts think it could go further.
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US futures dropped Tuesday after the wildest day in the markets since the coronavirus crash of March 2020, as volatility continued to surge ahead of the upcoming Federal Reserve meeting.

Meanwhile, bitcoin found a foothold and moved higher, as some calm descended on cryptocurrencies after a brutal sell-off that wiped $400 billion off the total market value in a couple of days.

Futures contracts for the benchmark S&P 500 index were down 0.71% Tuesday, indicating that stocks were likely to fall at the open. Dow Jones futures were 0.26% lower.

Technology stocks looked set for the biggest drops, with futures for the tech-heavy Nasdaq 100 index tumbling 1.04%.

US stock markets were rocked on Monday, with the S&P 500 dropping about 4% before bouncing and finishing 0.28% in the green, in the biggest swing since March 2020.


The Nasdaq 100 index went on an even wilder ride, plunging 5% before recovering to close 0.49% higher. The S&P 500 is down more than 7% year-to-date, while the Nasdaq 100 has tumbled 11%.

Investors are on edge as the Fed gears up to bring an end to the easy-money era that has lifted tech stocks of all stripes – including unprofitable ones – and speculative assets such as bitcoin.

Markets expect the Fed to raise interest rates four times in 2022, starting in March. But there is some nervousness that the world's most powerful bank could go faster and harder as it tries to stamp down on the strongest inflation in almost 40 years, potentially hurting the economy.

The Fed's latest monetary policy meeting starts Tuesday, and will announce its decision Wednesday. Investors will be searching for clues about the pace of interest-rate hikes.

Read more: An investment chief lays out 3 ways to avoid 'stupid expensive' US stocks and capitalize on the biggest opportunity in foreign stocks in 40 years


Markets are also worried about the possibility of Russia invading Ukraine, with the situation weighing on European stocks in particular. And they are concerned that fourth-quarter earnings aren't as strong as many would have hoped, although reports from the likes of Tesla and Apple this week could lift the mood.

Asian stocks tumbled overnight after the volatility in US stock markets. China's CSI 300 dropped 2.26%, and was close to entering a bear market – a fall of 20% or more from previous highs. Tokyo's Nikkei 225 fell 1.66%.

European stocks rose after a sell-off knocked the continent-wide Stoxx 600 index 3.6% lower on Monday. The Stoxx rose 1.09% in early trading, while London's FTSE 100 climbed 1.05%.

"Investors are still bracing for a fresh bout of volatility this week," Susannah Streeter, senior markets analyst at Hargreaves Lansdown, said.

"A heightened sense of nervousness remains about just how tough the Federal Reserve will talk and act to try and get increasingly troublesome inflation under control."


US bond yields rose after dipping Monday. The yield on the key 10-year US Treasury note climbed around 2 basis points to 1.79%.

In crypto markets, bitcoin rose 7% to $36,412 on the Coinbase exchange as some investors appeared to "buy the dip." Ethereum's ether climbed 6% to $2,428. However, both were well below their respective record highs of close to $69,000 and $5,000 touched in November.

Analysts were divided about the outlook for financial markets, with some expecting further sharp falls but others predicting a bounce.

"This volatility we've seen this year is uncomfortable, but it is well within the range of normal based on history," Jeff Buchbinder, equity strategist at LPL Financial, said.

"Based on the still solid overall economic and earnings backdrop, our expectation that the inflation clouds may soon start to clear, and the stock market's historically solid track record early in Fed rate hike cycles, we wouldn't expect this pullback to go much further."