Thursday December 15th


Stock futures fall a second day on fears the Fed will tip the economy into a recession

U.S. stock index futures were sharply lower Thursday following the Federal Reserve’s latest policy update, as investors worried the central bank could tip the economy into a recession as it fights against inflation. Futures tied to the Dow Jones Industrial Average fell 240 points, or 0.7%. S&P 500 futures dropped 0.9%, and Nasdaq 100 futures lost 1.1%. Tesla shares fell more than 2% in the premarket after CEO Elon Musk sold a chunk of his stake in the company. Treasury yields declined following the most recent Fed rate hike, with the yield on the benchmark 10-year Treasury note falling below 3.5%. On Tuesday, the Dow fell 142 points, while the S&P 500 declined 0.61% and the Nasdaq Composite dropped 0.76%. The major indexes reacted negatively as investors digested the Federal Reserve’s latest comments following a boost to its overnight borrowing rate. The central bank said it will continue hiking rates through 2023 and projected a higher-than-expected terminal rate of 5.1%. With Wednesday’s half a percentage point hike, the targeted range for rates is currently 4.25% to 4.5%, which is the highest in 15 years. “The Fed just put a roadblock in front of Santa’s sleigh,” said Sylvia Jablonski, CEO and chief investment officer at Defiance ETFs. She also noted the tone of Fed Chair Jerome Powell, who in speech Wednesday afternoon sounded “strict” and clear that he “doesn’t have a plan to pause or take a reversal path.” “It’s going to be higher for longer and monetary policy is going to be more restrictive than thought,” Jablonski said. “The market is going to be handicapped by Fed policy for sometime longer. Though we like the news and like seeing CPI prints like the last one that led to a short-lived rally, this is going to give us some near-term volatility.” Despite favorable improvements like modest growth, spending and production, Powell indicated he remains concerned job gains are too robust and the unemployment rate is too good for the Fed’s fight against inflation. Investors will get another batch of economic data to digest Thursday. Retail sales, jobless claims and Philadelphia Fed manufacturing index are all due out at 8:30 a.m. ET. Asia-Pacific markets mostly traded lower after the U.S. Federal Reserve raised its benchmark interest rate by 50 basis points to the highest level in 15 years. The Hang Seng index fell 1.4%. In mainland China, the Shenzhen Component rose 0.3% and the Shanghai Composite fell 0.3% as official data showed retail sales shrank far more than expected, while industrial production disappointed. China’s annual Central Economic Work Conference will reportedly be held behind doors for two days until Friday. The S&P/ASX 200 fell 0.64% to 7,204.8. The Nikkei 225 in Japan traded 0.37% lower to 28,051.7 and the Topix fell 0.18% to 1,973.9 as investors digest trade data from Japan and South Korea. The Kospi also fell 1.6% to 2,360.97. Oil prices were kept in check Thursday as the dollar firmed, while the possibility of further increases to interest rates by global central banks also heightened demand concerns. Brent crude futures rose 38 cents, or 0.4%, to $83.08 a barrel, and U.S. crude futures gained 28 cents, or 0.3%, to $77.56. Gold prices retreated more than 1% on Thursday, falling to their lowest in a week, as the dollar strengthened after the U.S. Federal Reserve signalled higher interest rates for a longer period. Spot gold dropped 1.6% to $1,778.21 per ounce. U.S. gold futures fell 1.7% to $1,788.30.