US pre-open: Stocks seen lower on hawkish Fed

US futures pointed to a slightly weaker open on Wall Street as investors continued to mull the possibility of a rate hike as early as next month following Wednesday’s hawkish Federal Reserve minutes.

At 1125 BST, Dow Jones Industrial Average, S&P 500 and Nasdaq futures were 0.3% lower,.

“US stocks look set for a weaker start as a quicker rise in US interest rates risks deflating inflated asset prices amid a slowdown in corporate earnings,” said Jasper Lawler, market analyst at CMC Markets.

At the same time, oil prices were lower as the greenback gained ground on US rate hike expectations. West Texas Intermediate fell 2.2% to $47.12 a barrel and Brent crude was down 2.5% to $47.69.

Minutes from the latest Federal Open Market Committee released on Wednesday revealed that an interest-rate hike in June was a possibility, with a number of participants already angling for a hike at the April meeting.

The key phrase in the minutes was that “most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labour market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2% objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June."

“Market pricing still suggests a rate hike in June is unlikely, but the odds have improved significantly following the minutes,” said Lawler.

“The Fed is certainty aware of market expectations and by explicitly referencing June as a ‘live meeting’ are trying to massage them in the right direction. As is often the case with communications from the Fed, these minutes were an exercise in managing expectations.”

In corporate news, shares in seed giant Monsanto surged in pre-market trade after German pharmaceutical group Bayer confirmed it was in takeover talks with the US company.

Wal-Mart and Dick’s Sporting Goods were among the companies slated to report earnings.

On the data front, the Philadelphia Fed survey, Chicago Fed activity index and initial jobless claims are at 1330 BST. Leading indicators are at 1500 BST.

Investors will also turn their attention to speeches from Fed Vice Chair Stanley Fischer and New York Fed President William Dudley at 1315 BST and 1430 BST, respectively.