Stock Futures Edge Lower After Rally

Stocks have largely fallen in recent weeks as investors contemplated the global economic outlook, central banks’ plans to tame inflation, geopolitical tensions and China’s zero-Covid strategy. The culmination of factors has boosted volatility in markets. Even with Tuesday’s rally, the S&P 500 is down about 14% this year. 

At the forefront of investors’ minds is decades-high inflation in the U.S., how much policy makers are willing to tighten financial conditions to subdue it and what that means for economic growth. Federal Reserve Chairman

Jerome Powell

said Tuesday the central bank’s resolve in combating inflation shouldn’t be questioned, even if it requires pushing up unemployment.

“Our expectation is that growth will start to slow down over the next few months,” said

Salman Ahmed,

global head of macro at Fidelity International, adding that he anticipates that the Fed’s actions will help curb inflation. “Then the next step for the Fed will be to focus on the growth shock.”

The mix of concerns hitting markets has led Mr. Ahmed to adopt a more cautious investment approach in recent weeks, he said. 

Investors are also monitoring whether Russia’s war against Ukraine could further bolster geopolitical tension. Finland and Sweden formally applied for NATO membership on Wednesday, a move that, if approved, would fundamentally transform the security landscape of Northern Europe. 

In bond markets, the yield on the benchmark 10-year Treasury note ticked down to 2.964% from 2.969% Tuesday. Yields and prices move inversely. 

Brent crude, the international benchmark for oil, added 1.6% to $113.66 a barrel. Oil prices have been highly reactive in recent months to both Russia’s war against Ukraine, which could disrupt supplies, and lockdowns in major Chinese cities that sap demand. Shanghai’s government has begun preparing the city for reopening.

Stocks in Asia were mixed as Hong Kong’s Hang Seng added 0.5% after falling as much as 0.9% during the session and Japan’s Nikkei 225 index climbed 0.9%, whereas China’s benchmark Shanghai Composite declined 0.2%.

Overseas, the pan-continental Stoxx Europe 600 edged down 0.1%. The British pound fell 0.7% against the dollar after fresh figures showed that U.K. annual inflation reached a four-decade high of 9% in April as higher energy prices fed through households’ utility bills.

In Asia, new data showed that Japan’s economy contracted in the first three months of this year, when restrictions related to a resurgence of Covid-19 infections held back consumer spending. Despite that, Japan’s Nikkei 225 closed 0.9% higher. 

South Korea’s Kospi and Hong Kong’s Hang Seng each added 0.2% Wednesday. China’s Shanghai Composite declined almost 0.3%.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

Corrections & Amplifications
Federal Reserve Chairman Jerome Powell said Tuesday the central bank’s resolve in combating inflation shouldn’t be questioned. An earlier version of this article incorrectly said that Mr. Powell had made the statement on Wednesday. (Corrected on May 18.)