S&P 500 Futures Edge Higher Following More than 1.6% Decline the Previous Session

Key Takeaways

• Wall Street experiences sharp decline as Fed hints at future rate hikes
• Dow initially rises by 201 points before plummeting by over 530 points or 1.6%
• Fed’s decision to raise rates and concerns about inflation weigh on stock market
• Some members of the Federal Open Markets Committee suggest additional tightening may be possible

Overview

In the pre-market session on Wednesday evening, U.S. equity futures were trading higher, with futures tied to the Dow Jones Industrial Average increasing by 153 points or 0.47%. Similarly, S&P 500 futures rose by 0.57%, and Nasdaq 100 futures advanced by 0.68%.

This can be seen as positive market movement, reflecting the impact of traders digesting the latest policy update from the Federal Reserve.

Wall Street Sees Sharp Decline as Fed’s Powell Hints at Possible Future Rate Hikes

During regular trading, the major averages experienced a sharp decline, with the Dow initially rising by 201 points before plummeting by over 530 points or 1.6%. The S&P 500 and Nasdaq Composite also dropped by more than 1.6%.

On Wednesday, Wall Street was volatile as the U.S. Federal Reserve’s expected policy hike of 25 basis points was announced, with hints that future increases may be paused due to recent financial turmoil.

Prior to the announcement, the U.S. stock indexes had no clear direction, but after the statement and subsequent Q&A session with Chair Jerome Powell, they initially rose before declining. By the end of trading, all three indexes had fallen by more than 1.6%.

Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina, commented, “The market initially responded positively to the Fed’s consideration of a complete pause, but was disappointed when Powell clarified that they can still raise rates if necessary.”

Federal Reserve’s Rate Hike Decision and Powell’s Comments Weigh on Stock Market, with Concerns About Inflation and Banking Sector Turmoil

The Federal Reserve’s decision to raise rates by 25 basis points, as expected, and Chairman Jerome Powell’s subsequent comments during the conclusion of the two-day meeting, caused a decline in the stock market.

Although the central bank removed the phrase “ongoing increases” from its statement, suggesting that its tightening campaign could be nearing the end, some members of the Federal Open Markets Committee (FOMC) still indicated that additional tightening could be possible.

Investors were reminded that inflation is still a main concern for policymakers. This led to a sharp drop in regional bank stocks and added to concerns that the Fed’s aggressive battle against inflation could tip the economy into recession.

Treasury Secretary Janet Yellen’s remarks that the FDIC was not considering “blanket insurance” for deposits arising from recent strife in the sector also weighed on the market.

Traders are now looking forward to the weekly jobless claims update and new home sales data, while General Mills and Darden Restaurants are scheduled to report their latest financial results.