U.S. stock futures fell early Thursday as Wall Street reeled over claims by Federal Reserve Chairman Jerome Powell that hopes for a political pivot were ‘premature’ after the central bank made a fourth consecutive interest rate hike of 75 basis points.
Futures contracts linked to the S&P 500 (^GSPC) fell 0.3% after the index plunged 2.5% in the previous session, its worst one-day loss from the Fed since January 2021, according to data from Bloomberg. Futures contracts on the Dow Jones Industrial Average (^ DJI) fell 80 points, or 0.2%, and contracts on the technology-focused Nasdaq Composite (^IXIC) decreased by 0.4%.
Meanwhile, Treasury yields rose, with the key 10-year note nearing 4.2% and the rate-sensitive 2-year yield above 4.7%. The US dollar index also rose.
The S&P 500’s 2.5% loss on Wednesday marked its 54th drop of 1% or more in 2022 – the worst downside volatility since 2009, according to Charlie Bilello of Compound Advisors.
US investors also drew their attention to the action across the Atlantic, with the Bank of England following the Fed’s move, also raising interest rates by three-quarters of a percentage point.
Wednesday’s increase takes the Fed’s benchmark rate, the federal funds rate, to a new range of 3.75% to 4%, its highest level since 2008. Although the move is in line with expectations, shares fell after Powell indicated officials could raise interest rates above the previously estimated 4.6% – signaling that further tightening is certain, even after the policy statement the implied hikes could be smaller.
“The market initially viewed November’s Federal Open Market Committee (FOMC) statement as dovish, but a hawkish press conference caused those moves to almost completely reverse due to comments that “the ultimate level of interest rates interest will be higher than expected” and it is “premature to think about suspending rate hikes,” said economists at Bank of America led by Michael Gapen.
The FOMC statement also acknowledged the lagged effects of cumulative monetary tightening, suggesting increased attention by the rate-setting group to concerns about economic growth.
Investors are now turning their attention to most important jobs report at 8:30 a.m. ET on Friday. Labor Department figures are expected to show a payroll gain of 190,000 for October, according to Bloomberg estimates. The print, if realized, would mark a decline in numbers seen throughout the pandemic recovery, but reflect still robust hiring, with pre-COVID payrolls averaging 150,000 to 200,000 per month.
Powell also said in his speech that “the labor market continues to be unbalanced, with demand far outstripping the supply of available workers.”
In corporate news, Elon Musk plans to cut about half of Twitter’s workforce (3,700 of about 7,500 employees), according to a Bloomberg News report – just a week after closing an extended bid to buy the social media platform in a $44 billion deal.
On the earnings side, Qualcomm shares (COMQ) fell around 8% in extended trading after the smartphone chipmaker released a forecast below estimatesciting macroeconomic headwinds and COVID lockdowns in China.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc