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Post: Market Snapshot: U.S. stock futures rise from three-month lows, but nervousness over Fed policy lingers

U.S. stock futures moved off three month lows Thursday as buyers returned following another Fed-induced sell-off.

How are stock index futures trading
  • S&P 500 futures
    ES00,
    +0.19%

    rose 15 points, or 0.4%, to 3821

  • Dow Jones Industrial Average futures
    YM00,
    +0.26%

    climbed 122 points, or 0.4%, to 30404

  • Nasdaq 100 futures
    NQ00,
    +0.13%

    eased 40 points, or 0.3%, to 11750

On Wednesday, the Dow Jones Industrial Average
DJIA,
-1.70%

fell 522 points, or 1.7%, to 30184, the S&P 500
SPX,
-1.71%

declined 66 points, or 1.71%, to 3790, and the Nasdaq Composite
COMP,
-1.79%

dropped 205 points, or 1.79%, to 11220. The S&P 500 is down 20.5% for the year, and the Nasdaq Composite has lost 28.3% over that period.

What’s driving markets

U.S. stock futures are trying to bounce off three-month lows delivered after the Federal Reserve produced another jumbo rate hike and reiterated its commitment to crush inflation, even it that meant a possible recession, and by extension lower company earnings.

“We will keep at it until the job is done,” Chair Jay Powell said in a news conference on Wednesday after the Fed increased borrowing costs for the third time in a row by 75 basis points to a range of 3% to 3.25%.

“I wish there were a painless way to do that. There isn’t,” he added as the Fed projected it may have to raise rates as high as 4.4% by the end of the year and that unemployment may rise and the economy slow sharply.

“Markets were all over the place after the meeting finished but risk assets ultimately sold off after an initial rally,” noted strategists at Deutsche Bank in a Thursday morning note.

Ipek Ozkardeskaya, senior analyst at Swissquote, agreed that ultimately equity traders did not like what they heard from the Fed. “‘Ugly’ is a good word to describe the market mood this morning. The selloff will likely continue,” she added.

Still, S&P 500 futures reversed early session losses to enter positive territory as they approached the opening bell. However, the CBOE Vix index
VIX,
-1.50%
,
a measure of expected S&P 500 volatility known as Wall Street’s “fear gauge,” was hovering above 27, near its highest level since the end of June and well above the long run average of 20.

The latest stock market relapse leaves the benchmark S&P 500 precariously placed, having decisively broken below perceived support at 3,900 and now within sight of the lows for the year of 3667, analysts observed.

“After several days of chop between the 3,850 and 3,900, the [S&P 500] got a final rejection of 3,900 today before closing under 3,800…We believe the pain trade is lower. Given today’s [Wednesday’s] downside reversal and a continued lack of any capitulatory signals, we think the path to the June lows might be faster than many anticipate,” wrote Jonathan Krinsky, chief market technician at BTIG.

However, Krinsky stressed that though the market was continuing to to face seasonal headwinds, such conditions should improve by mid-October. “We think we test or break the June lows before then, which should set up a better entry point for a year-end rally,” he concluded.

U.S. economic updates set for release on Thursday, include the weekly jobless claims data and the current account deficit report, both due at 8:30 a.m. Eastern. The leading economic indicators report is published at 10 a.m.

Elsewhere, the trend for tighter monetary policy among developed nations continued apace on Thursday — with one notable exception. Norway’s central bank raised borrowing costs by 50 basis points to 2.25% and the Swiss National Bank hiked by 75 basis points to 0.5%. The Bank of England is expected later to raise rates, too.

But the Bank of Japan left policy unchanged, leaving overnight rates at minus 0.1% as it maintained that inflation of 2.8% mainly reflects surging commodity prices.

The BoJ promptly intervened in the market, pushing the dollar
USDJPY,
-0.96%

lower, a trend also reflected in the euro and sterling, and a move which helped sentiment in U.S. equity futures, where the greenback’s recent surge to a 20-year high has proved a headwind of late.

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