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Dow futures decline greater than 400 points as market rebound fizzles

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U.S. stock index futures fell Wednesday, putting the foremost averages on course to offer up a few of the previous session’s sharp gains.

Futures contracts tied to the Dow Jones Industrial Average fell 462 points, or 1.5%, while S&P 500 futures declined 1.7%. Nasdaq 100 futures dropped 1.8%.

Those moves come as growing fears of an economic recession continued to weigh on investors. Federal Reserve Chair Jerome Powell will appear before Congress on Wednesday, kicking off two days of testimony, where he is predicted to talk on the central bank’s plans to tamp down inflation, which has surged to 40-year highs.

Last week, the Federal Reserve hiked rates of interest by three-quarters of a percentage point, or its largest rate increase since 1994.

Investors continued to deliberate whether the central bank can navigate a soft landing with some Wall Street banks recently raising their odds of a recession.

Citigroup increased its odds of a worldwide recession to 50%, pointing to data that buyers are beginning to pull back on spending.

“The experience of history indicates that disinflation often carries meaningful costs for growth, and we see the mixture probability of recession as now approaching 50%,” read a note from Citigroup.

Goldman Sachs believes a recession is becoming increasingly likely for the U.S. economy, saying that the risks of a recession are “higher and more front-loaded.”

“The principal reasons are that our baseline growth path is now lower and that we’re increasingly concerned that the Fed will feel compelled to reply forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even when activity slows sharply,” the firm said in a note to clients.

Meanwhile, UBS said Tuesday in a note to clients that it doesn’t expect a U.S. or global recession in 2022 or 2023 in its base case, “however it’s clear that the risks of a tough landing are rising.”

“Even when the economy does slip right into a recession, nevertheless, it needs to be a shallow one given the strength of consumer and bank balance sheets,” UBS added.

Stock picks and investing trends from CNBC Pro:

On Tuesday, the Dow surged 641 points, or 2.15%. The S&P 500 added 2.45%, turning in its best day since May 4. The jump comes after the benchmark index slumped 5.79% last week in its worst weekly performance since March 2020.

The Nasdaq Composite advanced 2.51% on Tuesday, following its tenth week of losses within the last 11 weeks.

On the earnings front, KB Home will post results after the market closes on Wednesday.

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