Stocks slipped back, losing their momentum after a roaring rally in the last session spurred on by signals from the Federal Reserve that it will fight inflation without the use of mega-sized interest-rate increases.
Futures for the Dow Jones Industrial Average retreated 190 points, or 0.6%, after the index rallied 932 points on Wednesday to close at 34,061. S&P 500 futures indicated a start 0.8% lower, with the Nasdaq poised to decline 1% after the two indexes surged 3% and 3.2%, respectively, in the last session. It was the best one-day performance for the S&P 500 since May 2020.
Overseas, the pan-European Stoxx 600 rose 1.1% to play catch-up with Wall Street’s late-in-the-day rally. Stocks were more mixed in Asia, where Hong Kong’s Hang Seng Index lost 0.4% after economic data from China revealed how strict Covid-19 lockdowns have weighed on the country’s economy and service sector.
The Federal Reserve said Wednesday that it would raise interest rates by a sizable half-point, following on from a quarter-point hike in March, and that more increases of a similar size were on the table. Markets were expecting that. The Fed will also begin reducing its bondholdings next month and shrink its balance sheet as part of its efforts to rein-in historically high inflation.
In a press conference, Fed Chair Jerome Powell said the central bank wasn’t considering a 75 basis-point rate hike—a move investors had feared—providing more ammo for Wednesday’s rally. But the momentum appeared lost on Thursday, and stocks remain deep in the red so far this year, with the Dow having lost 6.9% with the S&P 500 down 10.4% since the start of 2022.
“The Fed intentionally or unintentionally decided that the market has had enough stress for now and clamped down on the more hawkish potential near-term paths for policy,” said Jim Reid, a strategist at Deutsche Bank .
“In my opinion the Fed can control the near-term market expectations but beyond that it is all about the inflation data,” Reid added. “If it doesn’t improve then 50 basis-points will be live at every meeting and not just the ‘next couple,’ and 75 basis-point risks will be back on the table.”
Here are two stocks on the move Thursday:
JD.com (ticker: JD) and NIO (NIO) slumped 3% and 4%, respectively, in the U.S. premarket. They were among more than 80 U.S.-listed Chinese companies added to a Securities and Exchange Commission list for possible delisting if they don’t increase transparency with their financial accounting.
Write to Jack Denton at firstname.lastname@example.org