Stock futures fell on Thursday, a day after the Federal Reserve’s rate outlook sparked a sell-off.
Futures on the Dow Jones Industrial Average dropped 110 points, or 0.35%. S&P 500 futures shed 0.45% and Nasdaq 100 futures fell 0.55%.
The closely-watch Federal Reserve meeting Wednesday spurred a sell-off in equities after the central bank moved up its timeline for rate hikes, seeing two increases in 2023. The Fed also hiked its inflation hitting 3.4% this year, a percentage point higher than the FOMC’s forecast in March.
Materials stocks were set to drop on Thursday as higher rates may further take the air out of a big commodities rally in 2021. China is also cracking down on the commodities surge to ease inflation fears. Freeport-McMoRan led materials stocks lower in premarket trading, down 2%. Copper futures were off by 2%.
Wells Fargo and Citigroup were higher in premarket trading on hopes higher rates will boost profits for banks.
Some once-hot tech stocks were lower in premarket trading with Zoom Video and Tesla down by about 1%.
On Wednesday, the Dow lost about 265 points and the S&P 500 edged 0.5% lower. The Nasdaq Composite dipped 0.2%.
Markets rallied off their intraday lows Wednesday after Fed Chair Jerome Powell said projections for future rate increases should be “taken with a big grain of salt” and reiterated that he believes that inflation is transitory. Powell also did not issue guidance on when the central bank will begin tapering its bond-buying program.
“You can think of this meeting that we had as the ‘talking about talking about’ meeting, if you’d like,” Powell said when asked about tapering. “I now suggest that we retire that term, which has served its purpose.”
The Fed chair said the central bank will continue to monitor the economic recovery and will provide “advanced notice” before announcing any updates regarding tapering.
“The market is reacting violently to the Fed’s upgrade to the inflation forecast and bringing those two interest rate increases forward, but I’m not sure what they were expecting considering some of the [inflation] numbers,” said Michael Arone of State Street Global Advisors.
“There’s this disconnect between the summary of economic projections and what’s in the statement,” Arone said. “The big question is ‘is this transitory or is it more permanent?’ and what the Fed did today didn’t help clarify that conversation.”
The Labor Department reported that initial jobless claims rose last week to 412,000, an improvement from the previous week’s 375,000, but above Dow Jones expectations of 360,000.
Lennar and Kroger popped in premarket trading after reporting better-than-expected earnings.
