February 5, 2023

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Stock futures fell on a second day on concerns that the Federal Reserve could push the economy into recession

Stock futures fell on a second day on concerns that the Federal Reserve could push the economy into recession

Stock futures fell sharply Thursday after the Fed’s latest policy update, as investors worried the central bank could tip the economy into recession as it continues its fight against inflation.

And futures contracts related to the Dow Jones Industrial Average fell 350 points, or 1.05%. S&P 500 futures fell 1.3% and Nasdaq 100 futures lost 1.59%.

Tesla Shares fell more than 2% in the primary market after CEO Elon Musk sold part of his stake in the company.

Treasury yields fell after the Fed’s latest rate hike, with the yield on the benchmark 10-year Treasury note dropping below 3.5%.

The moves follow a bearish session on Wednesday when the Dow Jones fell 142 points, while the S&P 500 fell 0.61% and the Nasdaq Composite fell 0.76%.

Investors digested the Fed’s latest comments after a Boost your borrowing rate overnight. The central bank said it would continue to raise interest rates until 2023 and expected a higher-than-expected interest rate of 5.1%. With Wednesday’s rise of half a percentage point, the target range for rates is currently between 4.25% and 4.5%, the highest in 15 years.

“Overall, we expected to hear Chairman Powell confirm that the ‘hard part’ of inflation returning to 2.0% is just beginning. We’ve pretty much gotten that message,” Bank of America’s Michael Jabin wrote in a note on Wednesday.

“The Fed remains willing to risk a labor market slump in order to bring down inflation, and if anything, the December forecast suggests that risks have risen, not waned. We agree and continue to look for a recession in the first half of 2023. And a sharply higher unemployment rate than the average FOMC projects.”

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Despite positive improvements such as modest growth, spending and production, Powell indicated that he is here to stay The job gains involved are very strong And the unemployment rate is very good for the Fed’s fight against inflation.

Investors will have another batch of economic data to digest on Thursday. Retail sales, unemployment claims, and the Philly Fed Manufacturing Index are due at 8:30 AM ET.