US stock futures and global indexes fell, suggesting that the Wall Street rally after the Fed meeting was not going to last.
S&P 500 futures fell 2.1% on Thursday, a day after the general index rallied 1.5% to end a five-day losing streak. Blue-chip Dow Jones Industrial Average Futures lost 1.8% while Nasdaq-100 futures fell 2.5%, putting technology stocks on a trajectory of sharp losses after opening.
Abroad, European indices opened sharply lower. The global Stoxx Europe 600 index fell 1.9% with strong losses for interest-sensitive tech companies and economically sensitive retail stocks. In Asia, the indexes were more mixed, with the Japanese Nikkei 225 up 0.4% while the Hang Seng in Hong Kong fell 2.2%.
In anticipation of the launch campaign, shares of tech companies fell, with Nvidia,
Amazon and Microsoft are down 2.7% or more. Twitter shares were an exception, up 2.6% after the Wall Street Journal reported that Tesla CEO Elon Musk is expected to confirm that he wants to buy the social media company when he spoke to its employees on Thursday.
The Fed raised its benchmark interest rate by 0.75 percentage points on Wednesday, its biggest rise in nearly three decades as it struggled to contain rampant inflation. While the much-anticipated move sparked a Wall Street rally as investors welcomed the inflation effort, that optimism faded on Thursday as investors pondered the risk to the economy after years of low interest rates and lukewarm consumer price hikes.
“The market is struggling with the fact that there is an ongoing regime change,” said Aoifinn Devitt, head of investment at Moneta. “Investors are either worried about inflation or they are worried about the Fed crashing the economy.
Fed Chairman Jerome Powell suggested on Wednesday that the “unusually large” rate hike would not be common, but left the door open for another 0.75 percentage point increase next month.
Rising interest rates of this magnitude could upset investors if they feel the Fed is running too fast to curb inflation, Devitt said. “This could lead to even greater market concern,” he said.
The world’s central banks are also rushing to tighten their policy on similar economic woes. The Swiss central bank surprised analysts on Thursday by raising interest rates by 0.5 percentage points to a negative 0.25%. Economists expected bankers to keep interest rates unchanged.
Later on Thursday, the Bank of England is expected to raise its key interest rate to 1.25% from 1%, which would be its fifth move in five sessions.
The yield on US benchmark bonds rose to 3,400% from 3,389% on Wednesday.
The WSJ Dollar Index, which measures the dollar against a basket of peers, rose 0.1%.
In commodity markets, Brent crude, the international benchmark for oil, fell 0.5% to $ 118.00 a barrel. Gold prices rose 0.8%.
The weekly data on unemployment benefits, expected at 8:30 a.m. ET, are expected to show that 220,000 Americans applied for unemployment benefits in the week ended June 11. The job market has been a powerhouse for the economy, but Fed officials have pointed out that weaker employment figures may be a necessary consequence of the central bank’s effort to control inflation.
Write to Will Horner at email@example.com
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