Dow futures fall 235 pts; Powell's hawkish message weighs

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Dow futures fall 235 pts; Powell's hawkish message weighs

By Peter Nurse -- U.S. stocks are seen opening substantially lower Thursday, continuing the previous session’s weakness after Federal Reserve Chair Jerome Powell's hawkish message, indicating interest rates will go higher than expected and stay there longer.

At 07:05 ET (12:05 GMT), the Dow Futures contract was down 235 points, or 0.7%, S&P 500 Futures traded 37 points, or 0.9% lower, and Nasdaq 100 Futures dropped 145 points, or 1.2%.

The three major averages closed with losses Wednesday, with the blue-chip Dow Jones Industrial Average dropping 142 points, or 0.4%, the broad-based S&P 500 fell 0.6%, and the tech-heavy Nasdaq Composite lost 0.7%.

This followed the U.S. central bank hiking interest rates by 50 basis points, as expected, a slowdown from the four consecutive increases of 75 basis points.

However, Powell quickly dispelled any thoughts that the central bank would slow its hiking cycle early next year, saying “it will take substantially more evidence [than the October and November falls in consumer prices ] to give confidence inflation is on a sustained downward path.”

He signaled the central bank would continue raising rates to above 5% in 2023, above what the market had been expecting and not seen since a steep economic downturn in 2007.

Attention will now turn to a plethora of U.S. economic data releases later Thursday, including weekly jobless claims , retail sales and industrial production , for guidance of the strength of the U.S. economy in the wake of the series of aggressive rate hikes already instigated.

Also of interest will be the interest rate decision from the European Central Bank , with the Bank of England and the Swiss National Bank having already increased borrowing costs Thursday, both by 50 bps.

In the corporate sector, quarterly earnings come from the software company Adobe (NASDAQ: ADBE ), while Tesla (NASDAQ: TSLA ) is likely to be in the spotlight after CEO Elon Musk disclosed another $3.6 billion in stock sales, dragging the stock to near two-year lows.

Crude oil prices rose Thursday, rebounding after earlier losses, helped by optimism from influential investment bank Goldman Sachs (NYSE: GS ) about the asset class going into 2023.

Earlier the hawkish tone from the Federal Reserve coupled with weak economic data from China had raised fears about demand growth in the coming months.

Additionally, official data from the Energy Information Administration showing that U.S. crude stocks rose by a hefty 10 million barrels last week had weighed, as it suggested that near-term consumption in the world’s largest economy remained subdued.

By 07:05 ET, U.S. crude futures traded 0.1% higher at $77.34 a barrel, while the Brent contract rose 0.1% to $82.75.

Additionally, gold futures fell 1.7% to $1,787.60/oz, while EUR/USD traded 0.6% lower at 1.0620.

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