US pre-open: Futures head south following Fed rate hike

Wall Street futures were firmly in the red ahead of the bell on Thursday after the Federal Reserve hiked interest rates by 75 basis points overnight.

As of 1215 BST, Dow Jones futures were down 1.87%, while S&P 500 and Nasdaq-100 futures had the indices opening 2.25% and 2.64% lower, respectively.

The Dow closed 303.70 points higher on Wednesday after the Fed implemented its largest interest rate hike since 1994.

Fed chairman Jerome Powell said Wednesday's interest rate hike was "clearly" an "unusually large one" but added that he did not expect "moves of this size" to be common. Stocks traded higher after Powell signalled that a 50 or 75-basis point increase "seems most likely" at the central bank's next meeting in July but cautioned that decisions would continue to be made on a "meeting by meeting" basis.

However, decisions by other central banks to adopt a more aggressive monetary policy stance weighed on sentiment ahead of the bell, with the Swiss National Bank raising rates for the first time in 15 years and the Bank of England set to raise rates for a fifth consecutive time.

AvaTrade's Naeem Aslam said: "The Fed made it clear yesterday that they are willing to risk recession, but they are not willing to let the inflation reading run hot hence they increased the interest rate by 75 basis points rather than 50 basis points which they didn't previously point out. The Fed Chairman has made it clear to traders and investors that their future monetary is very much data-dependent, and market players should expect futures interest rate hikes anywhere between 50 to 75 basis points. Looking at the dot-plot, it becomes evidently clear that the Fed is likely to increase the interest rate by 50 basis points in every single meeting until the rest of the year.

"The Fed has a serious reputation problem now. Firstly, they called inflation a transitory matter, and they allowed it to run hot and failed to scale back on their dovish monetary policy in a timely manner. Now, they are desperate to put a leash on inflation at every cost, and traders are nervous that their desperation to bring inflation lower could lead them to make another policy mistake. For instance, if you look at their latest guidance, they revised their expectations for inflation and unemployment and dialled down their growth forecast, which is a perfect recipe for a recession to take place. Nonetheless, the Chairman is confident that he has the right tool to control inflation, and he justified his hawkish action by pointing out the growth figures for the quarter and strong consumer, both of which are printing terrible numbers."

On the macro front, May building permits data, the Labor Department's weekly jobless claims report and the Philadelphia Federal Reserve's June manufacturing index will all be published at 1330 BST.

In the corporate space, Kroger will report before the open, while Adobe will publish its latest set of quarterly earnings after the close.