Stock futures slip as investors reassess Fed comments
U.S. stock futures fell, with tech stocks on course for losses after the opening bell, as investors weighed the implications of the Fed’s most aggressive monetary policy tightening in over two decades.
S&P 500 futures fell 0.7% on Thursday. Contracts for the technology-focused Nasdaq-100 lost 0.9% and futures for the Dow Jones Industrial Average edged down 0.5%.
The pullback came a day after major U.S. stock indexes soared, with the Dow Jones surging more than 900 points, its biggest one-day gain since 2020. On Wednesday, central bank officials approved an increase in interest rate by half a percentage point, raising the federal government. – fund rates within a target range of between 0.75% and 1%. But it was comments from Fed Chairman Jerome Powell that energized markets after he said officials were not actively considering raising rates by three-quarters of a percentage point, or 75 basis points, during of its June meeting.
Powell’s comments came as a relief to investors who grew concerned that the Fed could raise interest rates too far, too quickly and possibly tip the economy into a recession.
But by Thursday, investor optimism had begun to wane. Even with a bigger increase in interest rates over the next few months, investors still face the most aggressive tightening of US monetary policy since 2000 – the last time the central bank raised rates by half -point. Many investors are now wondering how much the Fed might raise rates over the next two years and how that might affect the economy and corporate earnings.
Thursday morning, these jitters were observed throughout the market. In premarket trading in New York, growth stocks were particularly hard hit. Chipmakers Advanced Micro Devices,
Nvidia and NXP Semiconductors each lost more than 1.6%. Megacap’s technology shares also fell, with Tesla down 1.6% and Netflix down 1.5%.
Higher interest rates can diminish the appeal of tech stocks by reducing the value investors place on their future earnings. Higher yields in general also increase the appeal of fixed income products over riskier assets such as equities.
Booking Holdings jumped 10% before market after its revenue beat expectations and it said it saw strengthening global travel trends in the current quarter.
Etsy fell 11% after the online market posted a lower-than-expected forecast for the current quarter.
In the bond market, the yield on the benchmark 10-year Treasury note rose to 2.968% from 2.914% on Wednesday. Bond prices and yields move in opposite directions. On Wednesday, bonds rebounded alongside equities before losing momentum.
Assets that investors perceive as safer were among those that rallied on Thursday as fund managers sought safe havens amid volatility. The WSJ Dollar Index, which measures the US currency against a basket of 16 others, rose 0.4%. On Wednesday, the index fell 0.9%, its biggest drop since November 2020. The dollar’s status as the world’s reserve currency makes it a particularly attractive haven for investors.
The price of gold, another preferred safe haven, also climbed 1.4% to $1,895 per troy ounce.
In oil markets, Brent, the international oil benchmark, rose 0.6% to $110.80 a barrel.
Overseas, the pancontinental Stoxx Europe 600 index rose 1.4%. Banks, technology stocks and transportation companies are among those that have rallied. Italian bank UniCredit climbed 6.3% after its earnings beat analysts’ expectations. Airbus jumped 8.3% after the maker announced an increase in net profit and decided to increase production of its best-selling A320 single-aisle jetliner.
Shell gained 3.1% after first-quarter profit growth, boosted by soaring commodity prices.
In Asia, the Hong Kong Hang Seng fell 0.4% and the Shanghai Composite rose 0.7%. Markets in Japan were closed for a holiday.
Write to Caitlin McCabe at [email protected]
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