Wall St set for lower open as rate hike worries persist

© Reuters. Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 17, 2022. REUTERS/Brendan McDermid/File Photo

By Bansari Mayur Kamdar and Devik Jain

(Reuters) -Wall Street's main indexes were set for a dour start to the week as investors worried about hawkish signals from U.S. Federal Reserve policymakers in the face of slowing economic growth.

A four-week summer rally for the Nasdaq and the S&P 500 snapped last week as megacap growth companies slumped on Friday, with the benchmark 10-year Treasury yield hitting nearly 3% on inflation fears. [US/]

High-growth and technology companies such as Apple Inc (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) Inc fell 1.6% and 1.8%, respectively, in trading before the bell on Monday.

Lenders JPMorgan Chase & Co (NYSE:JPM) and Bank of America (NYSE:BAC) fell more than 1% each amid a broader risk-off mood. Banking giants collectively face more than $1 billion in regulatory fines for employees' use of unapproved messaging tools, including email and apps such as WhatsApp.

The CBOE Volatility index, Wall Street's fear gauge, rose to 23.16, its highest level in over two weeks.

After a rough start to the year, the benchmark S&P 500 recovered nearly 16% from its mid-June lows helped by strong earnings and hopes of a dovish pivot by the Fed.

Focus this week is on Fed Chair Jerome Powell's speech at a central banking conference in Jackson Hole on Friday for further cues on the central bank's monetary policy tightening path.

"The market convinced itself that the CPI last month suggested peak inflation has been reached ... but that was short sighted," said Kenny Polcari, managing partner at Kace Capital Advisors.

"Jackson Hole will give Powell an opportunity to reset the narrative and suggest the Fed is going to remain vigilant and aggressive."

According to economists polled by Reuters, the Fed will raise rates by 50 basis points in September.

Traders are also expecting a slightly higher chance of a 50 bps hike over a third 75 bps hike, even as several Fed policymakers have pushed back against expectations of a dovish pivot and emphasized the fight against inflation is ongoing.

Investors will also be looking for details on the central bank's plans to reduce its nearly $9 trillion balance sheet, a process that started in June.

The Fed's favored inflation gauge, the PCE price index, will also be released this week.

With recession fears lingering and investors eager for any clues about the economy's strength, other U.S. data will be closely awaited this week, including flash PMIs, the second estimate of second quarter GDP and University of Michigan consumer sentiment.

Economic slowdown fears have hit markets globally, with China's central bank trimming some key lending rates on Monday in a bid to support a slowing economy and a stressed housing sector.

At 8:32 a.m. ET, Dow e-minis were down 323 points, or 0.96%, S&P 500 e-minis were down 48.5 points, or 1.15%, and Nasdaq 100 e-minis were down 194 points, or 1.46%.

Signify Health Inc jumped 40.2% following a report on Sunday that UnitedHealth Group Inc (NYSE:UNH), Amazon.com Inc (NASDAQ:AMZN), CVS Health Corp (NYSE:CVS) and Option Care Health (NASDAQ:OPCH) Inc are bidding to acquire the company.

AMC Entertainment (NYSE:AMC) Holdings Inc tumbled 37.7% after UK-based rival Cineworld Group, the world's second-largest cinema operator, warned of a possible bankruptcy filing.