Stock futures came down after the Fed caused a relief rally
May 6, 2022: -On Thursday, Stock futures decreased, putting Wall Street on track to give back some sharp gains noticed in the last few session after the Federal Reserve has increased the rates by half a point.
Futures tied to the Dow Jones Industrial Average lost 163 points or 0.5%. S&P 500 futures and Nasdaq 100 futures came down to 0.6% and 0.8%.
The moves come after a huge rally for stocks. The Dow Jones Industrial Average increased 932 points or 2.81%, and the S&P 500 gained 2.99% for their most noticeable gains since 2020. The Nasdaq Composite surged to 3.19%.
Stocks increased for a third straight day to a monthly start after the Fed increased its benchmark interest rate by 50 basis points, as expected, and said it would start reducing its balance sheet in June. Although, during his news conference, Fed Chair Jerome Powell said that the Fed is “not actively considering” a more huge 75 basis point rate hike, appearing to spark a rally.
Some Wall Street strategists had suggested markets could see a relief rally after the rate increase. After Powell’s comments, investors seemed at ease about the central bank’s ability to slow inflation without triggering a recession.
Still, the Fed remains open to the prospect of taking rates above neutral to rein in inflation, Zachary Hill, head of the portfolio strategy at Horizon Investments, noted.
“Despite the tightening that we have seen in financial conditions over the last few months, it is clear that the Fed would like to see them tighten further,” he said. “Higher equity valuations are incompatible with that desire, so unless supply chains heal rapidly or workers flood back into the labor force, any equity rallies are likely on borrowed time as Fed messaging becomes more hawkish once again.”
It gained 3% after reporting a stronger-than-expected first quarter.
On Thursday, e-commerce company Shopify reported bad results on the top and bottom lines, sending the reduced stocks by 14%.
Investors will be eyeing jobless claims data in economic data, which is due at 8:30 a.m.
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