Dow Futures Slip, Oil Rises—and What Else Is Happening in the Stock Market Today

Fed Chair Jerome Powell has ushered in an end to pandemic-era monetary policy.


Julia Nikhinson/Bloomberg

Stocks wobbled Thursday as investors continued to digest the long-awaited increase in interest rates by the Federal Reserve on Wednesday, the first rate hike since 2018.

Futures for the


Dow Jones Industrial Average

slipped 20 points, or 0.1%, after the index rallied 518 points on Wednesday to close at 34,063.


S&P 500

futures signaled a start 0.1% into the red with the


Nasdaq

poised to open 0.2% lower.

Investors largely have reacted bullishly to the Fed’s long-anticipated move to raise interest rates by 25 basis points. The central bank indicated as many as six more rate hikes could come this year, and said it would begin quantitative tightening — reducing the size of its balance sheet — at a coming meeting, potentially in May.

Stocks were initially lower heading into the central bank’s announcement on interest rates, but staged a rebound after Fed Chair Jerome Powell’s press conference.

“We now have the start of only the fourth Fed hiking cycle in 27 years,” said Jim Reid, a strategist at Deutsche Bank. “Markets completely turned on Powell’s comments in the press conference that the probability of recession was ‘not particularly elevated’ and that the ‘economy is very strong’ and can handle tighter policy.”

The shift in policy ends a period of ultra-low interest rates and Covid-19 era pandemic stimulus. It happens against the backdrop of a war in Eastern Europe that risks slowing growth and volatile commodity markets that threaten to exacerbate inflation that already is at a 40-year high. The Fed noted that it will continue to closely watch the war in Ukraine, which has roiled oil and gas prices.

High inflation and fears of an economic slowdown have raised the prospect that the central bank will be hiking rates aggressively, which can weigh on growth, into a downturn.

“Although I think the risks of a U.S. recession by late 2023/early 2024 are increasingly elevated I’m not convinced that the risks are particularly high in 2022,” Reid said. “The start of the hiking cycle isn’t historically the problem point for the economy or for that matter equities.”

Overseas, the pan-European


Stoxx 600

rose 0.4% amid continued optimism over a diplomatic resolution to end Russia’s invasion of Ukraine; the index is now less than 1% below where it was before the full-scale invasion of Ukraine started. 

Amid ongoing talks, officials from both Russia and Ukraine have said that details of a peace deal have made progress, though on the ground Moscow’s offensive against major cities like Kyiv and Kharkiv continues.

“One can’t help thinking as far as Russia is concerned, they are going through the motions, while Ukraine will insist on cast-iron security guarantees of the type Russia might find difficult to live with,” said Michael Hewson, an analyst at broker




CMC Markets
.

“Markets appear content to look past these inconsistencies and new Russian atrocities, as have oil markets.”

In Hong Kong, the


Hang Seng Index

surged 7% after a 9.1% jump Wednesday — the index’s best day since 2008 — after China moved to boost the country’s economy and stabilize the stock market. State intervention comes amid a brutal selloff that has only accelerated in the last week, but reversed course following the news from Beijing.

“When a senior official makes announcements like yesterday’s, things have changed,” said Jeffrey Halley, an analyst at broker Oanda. “The Chinese government is drawing a line in the sand on the China equity rout over the medium-longer-term, and we should all respect that.”

In the commodity space, oil prices remained volatile but were holding below the key $100 a barrel mark. Futures for U.S. benchmark West Texas Intermediate crude were up 3.5% to around $98.50 a barrel; oil prices bottomed out below $94 on Tuesday after beginning the week trading above $106.

“Oil prices held steady overnight, led by the perception of diminishing Ukraine risks and a positive meeting between the leaders of Saudi Arabia and the United Kingdom,” noted Halley. “Oil remains vulnerable to another spike lower on positive Ukraine developments.”

Write to Jack Denton at jack.denton@dowjones.com

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