Stock futures falter as post-Fed rally fades


US stock futures and global indices tumbled, suggesting Wall Street’s rally after the Fed meeting was not destined to last.

S&P 500 futures fell 2.4% on Thursday, a day after the broad index rose 1.5% to end a five-day losing streak. Blue-chip Dow Jones Industrial Average futures fell 1.8% while Nasdaq-100 futures fell 2.8%, putting tech stocks on course for steep losses after the opening bell.

Overseas, European indices opened sharply lower. The pancontinental Stoxx Europe 600 index fell 1.9% with steep losses for rate-sensitive tech companies and economy-sensitive retail stocks. In Asia, indices were more mixed, with Japan’s Nikkei 225 rising 0.4% while Hong Kong’s Hang Seng fell 2.2%.

Before the opening bell, shares of tech companies fell, with Nvidia,

Amazon and Microsoft are each down 2.7% or more. Shares of Twitter were the exception, rising 2.6% after the Wall Street Journal reported that Tesla Chief Executive Elon Musk is expected to confirm he wants to buy the social media company when addressing to its employees on Thursday.

The Fed raised its benchmark rate by 0.75 percentage points on Wednesday, its biggest hike in nearly three decades, as it races to rein in runaway inflation. While the widely expected move prompted a rally on Wall Street as investors hailed efforts to rein in inflation, that optimism crumbled on Thursday as investors contemplated the danger posed to the economy after years of high rates. lows and tepid increases in consumer prices.

Federal Reserve Chairman Jerome Powell said the central bank’s goal was to reduce inflation to 2%. The Fed approved a 0.75 percentage point rate hike on Wednesday, the largest interest rate hike since 1994. Photo: Elizabeth Frantz/Reuters

“I think it’s the realization that we could really be heading into a recession. I’m not sure that has really crossed the minds of the market so far,” said Altaf Kassam, head of investment strategy for Europe, Middle East and Africa at State Street Global Advisors.

Fed Chairman Jerome Powell suggested on Wednesday that the “unusually large” rate hike would not become commonplace, but he left the door open for another 0.75 percentage point hike as early as next month.

Interest rate hikes of this magnitude could destabilize investors if they believe the Fed is running too fast to outpace inflation, said Aoifinn Devitt, chief investment officer at Moneta. “That can lead to even more anxiety in the market,” she said.

Losses accelerated after the Swiss central bank surprised investors by raising interest rates for the first time in 15 years. The Swiss National Bank raised its key rate by 0.5 percentage point to minus 0.25%, leaving only the Bank of Japan among the major central banks that did not raise rates to control inflation. Economists expected the SNB to leave rates unchanged.

“This is the final hurdle to clear,” said Seema Shah, chief strategist at Principal Global Investors. “If we get the central banks that have been seen as permanently accommodative rate hikes, it’s undeniable that there is a huge inflation problem in the global economy.”

The Swiss franc jumped against the dollar and the euro following the move. It appreciated by 1.6% against the dollar and by 1.8% against the euro. The WSJ Dollar Index, which measures the dollar against a basket of its peers, edged up 0.1%.

Later Thursday, the Bank of England is expected to raise its key rate to 1.25% from 1%, which would be its fifth move in five meetings.

The yield on the benchmark 10-year U.S. Treasuries rose to 3.400% from 3.389% on Wednesday, resuming their rise that pushed yields to their highest levels in more than a decade. Treasury yields, which move in the opposite direction to prices, help set rates on a variety of consumer products, including mortgages and auto loans.

In commodity markets, Brent, the international oil benchmark, fell 1.1% to $117.21 a barrel. The price of gold rose 0.8%.

Weekly jobless claims data, due at 8:30 a.m. ET, is expected to show that 220,000 Americans applied for unemployment benefits in the week ended June 11. The labor market has been an area of ​​strength for the economy, but Fed officials have signaled that weaker employment numbers may be a necessary consequence of the central bank’s effort to control inflation.

Wall Street stocks rose on Wednesday after the Federal Reserve’s interest rate decision.


Photo:

Justin Lane/Shutterstock

Write to Will Horner at [email protected]

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