Futures Drop as Post-Fed Rally Disappears
U.S. stock futures and global indexes fell, suggesting the post-Wall Street rally won’t last.
Futures tied to the S&P 500 fell 1.9% on Thursday, a day after The broad index rose 1.5% to stop a losing streak of five days. Dow Jones Blue-chip industry average futures lost 1.5% while Nasdaq-100 futures dropped 2.2%, sending technology stocks into a sharp loss after the opening bell.
Overseas, the continent-wide Stoxx Europe 600 index fell 1.9%, with sharp declines in rate-sensitive technology and economically sensitive retail stocks. In Asia, indexes were more mixed, with Japan’s Nikkei 225 up 0.4% while Hong Kong’s Hang Seng fell 2.2%.
In pre-market trading, shares of technology companies fell, with
and
each decrease from 2% to 3%.
stocks are an exception, rising 1% after The Wall Street Journal reported that
managing director
is expected to confirm that he wants to buy the social media company when he speaks to its employees on Thursday.
Fed on Wednesday increase its standard rate by 0.75 percentage points, its biggest gain in nearly three decades, as it raced to control rampant inflation. While the much-anticipated move prompted a rally on Wall Street as investors applauded efforts to quell inflation, that optimism flared on Thursday as investors awaited about the danger posed to the economy after years of low exchange rates and rapidly rising consumer prices.
“I think this is the perception that we might actually be heading towards a recession. I’m not sure that has really filtered the minds of the markets until now,” said Altaf Kassam, head of investment strategy for Europe, Middle East and Africa at State Street Global Advisors.
Fed Chairman Jerome Powell on Wednesday hinted that “unusually large” rate hikes would not be common, but he left the door open to another 0.75 percentage point hike as soon as next month.
Aoifinn Devitt, chief investment officer at Moneta, said rate hikes of this size could make investors nervous if they feel the Fed is racing too fast to stay ahead of inflation. “That could lead to further 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 policy rate by 0.5 percentage points to minus 0.25%, only
Among the major developed economies, central banks do not raise interest rates to curb inflation. Economists had expected the SNB to remain unchanged in the exchange rate.
“This is the last hurdle to fall,” said Seema Shah, chief strategist at Chief Global Investors. “If we’re asking central banks, who are seen as permanently dovish rate hikes, there’s no denying that there is a major inflationary problem in the global economy.”
The Swiss franc gained 2% against the dollar and 2.4% against the euro following the move. The WSJ Dollar Index, which measures the dollar against a basket of industry peers, rose 0.1%.
Bank of England on Thursday increase its main interest rate as expected from 1% to 1.25%, marking the fifth of many meetings and indicating bigger moves may be required to tame inflation. The pound rose 0.3% against the dollar following the decision.
Yields on the benchmark 10-year US bond rose to 3.473% from 3.389% on Wednesday, continuing a rally that has pushed yields to their highest levels in more than a decade. Treasury yields, in the opposite direction of prices, help set rates on a variety of consumer products including mortgages and auto loans.
Bitcoin fell 3% from ET at 5pm on Wednesday to $21,029.90, according to CoinDesk, making it of course down 10th day in a row. Cryptocurrencies have been hit by broad economic concerns that are affecting risky transactions and worries about select projects and companies in the cryptocurrency ecosystem.
In the commodity market, Brent crude, the international oil benchmark, fell 1.4% to $116.90 a barrel. Gold prices rose 0.2%.
The weekly jobless claims data, due at 8:30 a.m. ET, shows that 229,000 Americans filed for unemployment benefits in the week ending June 11. The job market is a sector. economic strength, but Fed officials signaled weaker jobs data. may be a necessary consequence on the central bank’s efforts to control inflation.
Write to Will Horner at [email protected]
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