Fed's high interest rate stance pushes U.S. stock futures lower

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Fed's high interest rate stance pushes U.S. stock futures lower
Credit: © Reuters.

U.S. stock futures continued to decline today, Thursday, following the Federal Reserve's decision to maintain higher interest rates for an extended period. The decision, which has pushed bond yields to their highest levels in 16 years, resulted in a drop in S&P 500 futures by 0.4% to settle at 4431. Dow Jones Industrial Average futures fell by 0.2% to 34660, while Nasdaq 100 futures decreased by 0.6%, ending at 15066.

This downward trend echoes the previous trading day's results when the Dow Jones Industrial Average fell by 0.22% to close at 34441. The S&P 500 declined by 0.94%, finishing at 4402, and the Nasdaq Composite dropped by 1.53%, closing at 13469.

The fall in equities coincided with Fed Chair Jerome Powell's press conference, aligning with the S&P 500's average performance on previous Fed meeting days. The volatility of this correlation suggests a more complex trading environment as higher rates can introduce turbulence into the U.S. equity market.

The Federal Open Market Committee's decision to maintain borrowing costs within a range of 5.25% to 5.50% at its September policy meeting led to an initial decline of 0.9% in the S&P 500 on Wednesday. This decision was accompanied by a reduction in projected rate cuts for 2024, now expected to be only 50 basis points, leading to a significant sell-off in both bonds and equities.

S&P 500 futures continued their decline today as the yield on the benchmark 10-year Treasury note reached around 4.42%, the highest since 2007.

Investors now await several U.S. economic updates due for release today, including the weekly initial jobless claims report, the September Philadelphia Fed manufacturing survey, and the second quarter current account deficit. The August leading economic indicators numbers and August existing home sales will be published later in the day.

In addition to domestic updates, investors are closely watching policy decisions from the central banks of the U.K. and Japan, due on today and Friday respectively. These decisions add to the uncertainty surrounding future monetary policy, a challenging dynamic of rising interest rates impacting stock markets.

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