Futures falter as Fed forecasts further rate hikes

2023-06-15 19:45

(Reuters) -U.S. stock index futures fell on Thursday as the Federal Reserve signaled that borrowing costs could increase further this

(Reuters) -U.S. stock index futures fell on Thursday as the Federal Reserve signaled that borrowing costs could increase further this year after it skipped raising them in its latest meeting.

The Fed left rates unchanged at the 5%-5.25% range on Wednesday, but indicated they could rise by at least half a percentage point this year as inflation remains stubbornly persistent and the U.S. economy stays resilient.

Traders see a 72% chance of a 25-basis-point rate hike in July, up from around 60% a day earlier, according to the CME Fedwatch tool.

"Powell expressed that the committee seemed surprised about the resilience of current inflation even if Tuesday's CPI print showed a continued slowing in the headline inflation rate," said Charles Hepworth, investment director at GAM Investments.

"Admitting to being surprised that the Fed's policy to date hasn't cooled a hot jobs market is basically signaling higher rates are indeed even more necessary and can be withstood by the economy as it glides (to) a soft landing."

The S&P 500 and Nasdaq rose for a fifth consecutive session on Wednesday, while the Dow ended down following the Fed decision.

Market heavyweights Apple, Nvidia and Amazon.com fell between 0.4% and 1.5% in premarket trading as government bond yields continued to rise. [US/]

Shares of Tesla dipped 3.1%. The stock snapped a record 13-day streak of gains in the previous session.

At 7:23 a.m. ET, Dow e-minis were down 78 points, or 0.23%, S&P 500 e-minis were down 18.25 points, or 0.41%, and Nasdaq 100 e-minis were down 107 points, or 0.7%.

Investors awaited a slew of economic data later in the day, including the initial jobless claims for the week ended June 10 and retail sales for May due at 8:30 a.m. ET.

Kohls Corp added 1.7% after TD Cowen upgraded the department store operator to "outperform" from "market perform".

U.S.-listed shares of Chinese companies such as Alibaba Group and JD.com rose almost 2% after the People's Bank of China cut the borrowing cost for its medium-term policy loans for the first time in 10 months.

(Reporting by Shristi Achar A and Sruthi Shankar in BengaluruEditing by Vinay Dwivedi)