Friday December 16th


Dow futures fall 300 points as Wall Street selloff continues

U.S. stock index futures were lower Friday morning as investors continued to dump stocks into year-end on fears a recession is ahead next year because of the Federal Reserve’s unrelenting rate hiking. Futures tied to the Dow jones Industrial Average lost 352 points, or 1%. S&P 500 futures lost 1% and Nasdaq-100 futures fell 0.8%. Stocks which would suffer in a recession declined in premarket trading Friday. GM and Caterpillar were each off more than 1% in premarket trading. Meanwhile, shares of Olive Garden-parent Darden Restaurants rose slightly in the premarket after reporting earnings that topped estimates. Friday’s selling follows a rough day for markets. The Dow dropped 764.13 points, or 2.25%, on Thursday for its worse daily performance since September. The S&P 500 and Nasdaq Composite fell 2.49% and 3.23%, respectively. Thursday’s disappointing retail sales report suggested inflation is hitting consumers more than expected. This has investors concerned that consumer spending is slowing, a sign that the economy is weakening. With these latest declines, the market is heading into Friday with all the indexes poised to notch a second consecutive week of losses. The S&P 500 is off 1% for the week and 4.5% for the month of December as hopes for a year-end rally fizzle. Stocks have been falling in the wake of the Federal Reserve’s 50 basis point interest rate hike on Wednesday — the highest rate in 15 years. The central bank said it would continue hiking rates through 2023 to 5.1%, a larger figure than previously expected. “After gouging themselves on hopes for a Fed pivot, equity traders are experiencing indigestion from [Wednesday’s] FOMC statement, which reiterated Jerome Powell’s theme of ‘higher for longer,’” said John Lynch, chief investment officer for Comerica Wealth Management. Trading could be especially volatile Friday with a large amount of options set to expire. There are $2.6 trillion worth of index options set to expire, the highest amount “relative to the size of the equity market  in nearly two years,” according to Goldman Sachs. They will also look for any hints on future Fed policy from speakers John Williams, Michelle Bowman and Mary Daly. Investors are trying to gauge the pace of future rate hikes and the central bank’s view of the economy. There also will be data coming in the morning with December’s purchasing managers’ indexes within services and manufacturing. Asia-Pacific markets traded mostly lower as recession fears grow. Disappointing U.S. retail sales for November suggested inflation is taking a toll on consumers and raising fears that the Fed’s rate hikes are tipping the economy into a recession. The Nikkei 225 in Japan fell 1.87% to close at 27,527.12, leading losses in the region, while the Topix lost 1.20% to end the session at 1,950.21. The Kospi in South Korea also fell 0.04% to 2,360.02. In Australia, the S&P/ASX 200 fell 0.78% to 7,148.7. The Hang Seng index gained 0.49% in the final hour of trade while the Shenzhen Component fell 0.55% to 11,295.03 in mainland China. The Shanghai Composite fell 0.02% to 3,167.9 as the second day of China’s annual Central Economic Work Conference reportedly took place behind closed doors. Oil fell on Friday as the market assessed the aftermath of interest rates hikes by central banks, but was poised for a weekly gain amid supply disruption concerns and hopes for a recovery of demand in China. Brent crude futures were down $1.56, or 1.9%, to $79.65 per barrel. West Texas Intermediate futures slipped $1.43, or 1.9%, to $74.68. Both benchmarks fell 2% in the previous session as the dollar strengthened and central banks in Europe raised interest rates. Gold prices firmed on Friday but were on course for their biggest weekly fall since mid-November as several central banks this week signaled that more rate hikes are needed to curb inflationary pressures. Spot gold rose 0.3% to $1,782.61 per ounce. It is down about 0.8% for the week so far, having hit a one-week low in the previous session. U.S. gold futures were up 0.3% at $1,792.70.