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Stock futures extend fall after Fed outlook signals rate hikes



Equity futures opened lower Wednesday night as investors considered the Federal Reserve’s recent monetary policy decision and updated projections that signaled a faster path to higher-than-expected interest rates. Contracts for the S&P 500, Dow and Nasdaq increased previous losses.

Each of the three major stock indices ended Wednesday’s session lower after the Fed’s new projections pointed to two rate hikes at the end of 2023. Members of the Federal Open Market Committee also upgraded their forecasts for economic growth and inflation, confirming market participants’ concerns about sustainably higher prices. While the Fed left interest rates on hold at the end of this month̵

7;s meeting and kept the pace of asset purchases unchanged, market participants are now preparing for a potentially less accommodating propensity for Fed policy.

“There was a more hawkish tone from the Federal Reserve, mainly from the committee, however [Fed Chair Jerome] Powell also offered an optimistic assessment of the economy with small steps toward the end, “said Michelle Meyer, U.S. economist at Bank of America, in a note Wednesday.” The big surprise came from the dots where the median expectation is now for 2 hikes in 2023 with only 2 dots away from 2022 also showing a hike. ”

“While Fed officials talk about ‘transient’ inflation, some clearly believe in greater persistence, which was reflected in upside risks to PCE. [personal consumption expenditures outlook] in SEP [summary of economic projections], ”She added.

On the other hand, however, the Fed also acknowledged that the workforce could be under pressure for some time given the significant difficulties the economy has had in recovering all the jobs lost during the pandemic, even though several reopens are taking place. Powell said during his news conference on Wednesday that the economy ultimately remained “a way away from” reaching “significant further progress” toward the Fed’s goal of maximum employment, which would signal a beginning of a contraction.

However, much of the employment data has evolved in the right direction, albeit with some moderate rate of improvement, and some persistent concerns about labor shortages. The Ministry of Labor’s weekly report on unemployment injuries on Thursday morning is expected to show a seventh consecutive move in the original unemployment filings for a new pandemic era.

“Even with a possible increase in asset purchases and a subsequent moderate rise in interest rates, we think it is clear that the background to the economy will generate a significant improvement in employment,” said Rick Rieder, BlackRock’s chief investment officer for global fixed income, -mail.

18:01 ET Wednesday: Stock futures fall and prolong previous falls

Here markets traded on Wednesday night:

  • S&P 500 futures (ES = F): 4,213.75, -9.25 points (-0.22%)

  • Dow futures (YM = F): 33.951.00, -66 points (-0.19%)

  • Nasdaq futures (NQ = F): 13,947.25, -34 points (-0.24%)

NEW YORK, NY - JUNE 02: Exterior view of the New York Stock Exchange and Wall St.  as new company Organon begins trading next Thursday in New York on June 2, 2021. Organon looks set to expand to offer treatments for other conditions unique to women, approx.  80% of the new company's revenue comes from countries outside the US (Photo by Kena Betancur / VIEWpress)

NEW YORK, NY – JUNE 02: Exterior views of the New York Stock Exchange and Wall St. as new company Organon begins trading next Thursday in New York on June 2, 2021. Organon looks set to expand to offer treatments for other conditions unique to women, approx. 80% of the new company’s revenue comes from countries outside the US (Photo by Kena Betancur / VIEWpress)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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