US STOCKS-Futures drop as yields rise after Fed signals higher-for-longer rates
Rate-sensitive stocks including Apple, Meta Platforms, Alphabet, and Nvidia fell between 0.6% and 2.3% in premarket trading as the two-year and 10-year Treasury yields scaled multi-year highs. The U.S. central bank delivered a widely anticipated pause on Wednesday and revised economic projections higher with warnings that the battle against inflation was far from over, prompting a weak session for Wall Street.
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U.S. stock index futures fell on Thursday pressured by a decline in growth stocks as Treasury yields jumped after the Federal Reserve signaled that another rate hike was in the offing this year. Rate-sensitive stocks including Apple, Meta Platforms, Alphabet, and Nvidia fell between 0.6% and 2.3% in premarket trading as the two-year and 10-year Treasury yields scaled multi-year highs.
The U.S. central bank delivered a widely anticipated pause on Wednesday and revised economic projections higher with warnings that the battle against inflation was far from over, prompting a weak session for Wall Street. The Fed's updated quarterly projections showed chances of the key rate being lifted one more time in 2023 to a peak range of 5.50%-5.75% and significantly tighter rates through 2024 than previously expected.
Some investors, however, doubt the central bank will stick to its guns, even though bets against the Fed's hawkishness have mostly backfired since policymakers embarked on a monetary policy tightening campaign in March 2022. "While the dot plots suggest upside risks to interest rates, we retain our expectations that the hike cycle is likely done and for the Fed not to raise rates again," Mark Haefele Chief Investment Officer, UBS Global Wealth Management, said in a note.
"A variety of factors could weigh on the economy in the fourth quarter and push the Fed to remain on hold due to below-trend growth and lower core inflation." Traders' bets on the benchmark rate remaining unchanged in November and December stood at 71% and 54%, respectively, according to CME's FedWatch tool.
Investors will also keep an eye on economic data including the weekly jobless claims and existing home sales data due later in the day for clues on the interest rates trajectory and the state of the economy. The CBOE volatility index, also known as Wall Street's "fear gauge" hit its highest level in over three weeks, reflecting rising investor anxiety.
Meanwhile, weak performance of recent listings after their debut highs has dampened hopes of a likely revival in the initial public offering market amid high interest rates and broader market declines. Marketing automation firm Klaviyo's shares fell 3.2% to $31.7 in premarket trading, after closing well below their intra-day debut high on Wednesday at $32.76.
Arm Holdings also fell 3.0% to $51.3 premarket, nearing its IPO price of $51 per share while Instacart lost 1.4%. At 7:16 a.m. ET, Dow e-minis were down 188 points, or 0.54%, S&P 500 e-minis were down 34.75 points, or 0.78%, and Nasdaq 100 e-minis were down 160.75 points, or 1.06%.
FedEx added 4.7% after surprising investors with a big quarterly profit beat. Broadcom fell 7.2% on report Alphabet-owned Google's executives discussed dropping the company as a supplier of artificial intelligence chips as early as 2027.
Marvell Technology rose 5.3% as the report said Google has been working to replace Broadcom with Marvell as the supplier for networking chips used in its data centers. Warner Bros Discovery and Paramount Global rose 0.3% and 0.9%, respectively, on a report that writers and producers were nearing an agreement to end the Writers Guild of America (WGA) strike.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)