US pre-open: Futures in the red after FOMC takes markets by surprise

Wall Street futures were in the red ahead of the bell on Thursday after the Federal Reserve stepped up its timeline for rate hikes, with two increases now likely set to take place in 2023.

As of 1220 BST, Dow Jones futures were down 0.27%, while S&P 500 and Nasdaq-100 futures were 0.32% and 0.49% lower, respectively.

The Dow closed 265.66 points lower on Wednesday as all eyes were fixed on the Federal Reserve.

The move by Central bankers in the US to nudge up their individual projections for short-term interest rates in 2022 and 2023 at their two-day policy meeting remained in focus on Thursday, with the median projection of participants on the Federal Open Market Committee now being for two hikes in 2023.

However, Fed chair Jerome Powell stated the projections should be taken with "a big grain of salt" and said the central bank would continue to monitor the US economic recovery and vowed to provide "advanced notice" before any updates regarding the tapering of the central bank's bond-buying program.

AJ Bell's Danni Hewson said: "The US Federal Reserve has proved a bit of an unreliable partner to the markets, promising not to raise rates too far or too fast and then suddenly announcing an acceleration in its plans on this front. For now, investors seem to largely be taking these developments in their stride – perhaps reassured by Fed chair Jay Powell's comments that the guidance for two interest rate hikes in 2023 should be taken with a 'grain of salt'.

"After all, we're still talking about something which might happen in two years' time and plenty could change in the interim, plus the reason rate rises are moving up the agenda is an improving economic outlook, so there is positive news here too. However, it is a reminder that investors will eventually have to confront the reality that the current ultra-loose monetary policy won't last forever and there were signs of volatility in the bond market off the back of the Fed's announcement with the dollar also rising to multi-month highs."

On the macro front, this week's jobless claims report from the Labor Department and June's manufacturing index from the Philadelphia Fed will be released at 1330 BST, while the Conference Board's leading index for May and testimony from Treasury Secretary Janet Yellen were both slated for 1500 BST.

In the corporate space, Adobe and Kroger will both report earnings on Thursday, while Wells Fargo and Citigroup traded higher in the pre-market amid hopes that higher rates will drive profits for banks.