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Futures signal more losses on Fed’s rate hike view

U.S. stock index futures slipped on Thursday, signaling a fresh round of selloff spurred by worries that the Federal Reserve’s rate-hike cycle is far from over as the central bank hinted at smaller rate hikes.

The benchmark S&P 500 (.SPX) ended 2.5% lower on Wednesday, marking its biggest percentage decline in almost a month, after the Fed raised rates by 75 basis points as expected, although Chair Jerome Powell said it was “very premature” to discuss when it might pause its increases.

Stocks had initially gained after the policy announcement left open the possibility of smaller increments, with traders still split between a rise of 50 bps and 75 bps in December.

However, rate futures markets implied the odds of peak Fed funds rate climbing to 5% or higher next year compared with a prior estimate of 4.50%-4.75% rise.

“Although the U.S. economy is beginning to decelerate, inflation remains stubbornly high, and the labor market is still very tight,” said Paul O’ Connor, head of multi-asset team at Janus Henderson Investors.

“While the balance of evidence suggests that the inflation news will improve from here, the Fed is unlikely to emit dovish tones until stronger proof of this has emerged.”

Data this week showed U.S. private payrolls increased more than expected in October and job openings jumped unexpectedly in September, signaling resilience in the labor market.

Focus will shift to Friday’s jobs data, expected to show nonfarm payrolls increased by 200,000 in October. The economy created 263,000 jobs in September.

At 5:16 a.m. ET, Dow e-minis were down 39 points, or 0.12%, S&P 500 e-minis were down 6.5 points, or 0.17%, and Nasdaq 100 e-minis were down 28.5 points, or 0.26%.

The tech-heavy Nasdaq (.IXIC) slumped 3.4% on Wednesday, as rate-sensitive growth stocks came under pressure from the prospect of higher rates for longer.

Shares of Apple Inc (AAPL.O) slipped 0.8% in premarket trading, but Amazon.com Inc (AMZN.O) gained 1.1%.

Qualcomm Inc (QCOM.O) tumbled 6.9% after the chipmaker’s forecast for holiday-quarter revenue fell about $2 billion short of Street estimates.

Roku Inc (ROKU.O) slumped 18.8% after the streaming platform forecast holiday-quarter revenue below Wall Street estimates as ad spending dries up.

Source: here