US pre-open: Futures trade lower following FOMC decision
Wall Street futures traded lower ahead of the bell on Thursday as market participants continued to digest the Federal Reserve's interest rate decision overnight.
As of 1230 BST, Dow Jones futures were down 0.01%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.14% and 0.31% higher, respectively.
The Dow closed 522.45 points lower on Wednesday after the Federal Reserve said it will raise interest rates by a further 75 basis points.
Comments from the central bank remained in focus prior to the open after policymakers vowed to continue raising rates as high as 4.6% in 2023 before pulling back as part of an effort to battle surging inflation.
However, news that the Fed expects to raise its year-end rate to 4.4% in 2022 left market participants fearful that the US economy may very well be rapidly approaching a recession.
AvaTrade's Naeem Aslam said: "Market players are still in the process of digesting the message from the Federal Reserve, which sent the US markets lower once again yesterday. The markets finely expected the decision of an interest rate hike by 75 basis points, and there was no element of surprise. However, it was Jerome Powell's speech that brought large whipsaws to the US equity markets. The Fed made it clear once again that they are determined to do whatever it takes to control inflation. Market players should not make any mistake in thinking that future interest rate hikes will not be of the same magnitude, especially the one in November. It is pretty much a done deal that the Fed will increase the rate by another 75 basis points in November and 50 basis points in December.
"The reason that US stock is under pressure is that traders believe that the possibility of a recession taking place in the US is strongly on the cards. In fact, many believe that the Fed is actually looking for a recession, given how aggressive they are with their monetary policy. However, the Fed did say last night that their monetary policy is very much determined by the economic numbers. But at the same time, they have already covered their back by adding that they are expecting some weakness crawling back in the labor market. In simple terms, the message was that the next month’s data and the number after that may show that the US labor is slowing down. This particular factor isn't going to change their strategy as they will still not only continue to increase rates, but in fact, the interest rates are likely to stay there for a while."
Also drawing an amount of attention before the bell was the two-year Treasury yield, which inched as high as 4.132% after the Fed's move and approached highs not seen since before the GFC in October 2007. The yield on the benchmark 10-year Treasury note stood at 3.5514% after hitting 3.64% overnight.
On the macro front, the Labor Department's weekly jobless claims report will be out at 1330 BST, while the Conference Board's August leading index will follow at 1500 BST.
FedEx, Carnival and Costco will all report earnings throughout the course of the day.
Reporting by Iain Gilbert at Sharecast.com