Thursday September 8th


Stock futures fall after ECB delivers large interest rate hike

U.S. stock markets index futures fell Thursday as Wall Street braced for more large rate hikes going forward following the ECB’s increase. Futures for the Dow Jones Industrial Average shed 85 points, or 0.27%. Futures for the S&P 500 fell 0.41%, and futures for the Nasdaq 100 declined 0.62%. Futures slipped after the European Central Bank hiked interest rates by 0.75 percentage point, raising its deposit to 0.75% from 0%, in a largely expected move to tamp down inflation. Next, traders are looking ahead to a Q&A session from Federal Reserve Chair Jerome Powell at the Cato Institute later in the day as they searched for more clues on the central bank’s plans for future rate hikes. The stock market is coming off a solid rebound during Wednesday’s regular trading hours. The Dow gained about 436 points, or 1.4%. The S&P 500 added 1.8%, and the Nasdaq Composite popped 2.1%. It was the best day since Aug. 10 for all three averages, and the Nasdaq snapped a seven-day losing streak. Even with Wednesday’s rally, stocks remain in a downtrend overall. Concerns about a slowing economy and further rate hikes from the Federal Reserve are pushing some investors away from riskier parts of the market. “Recession risk is rising and we have been moving more defensive in our portfolios as a result. However, high inflation means that traditional ‘risk off’ strategies such as cash and government bonds can create a drag on total return,” Lauren Goodwin, economist and portfolio strategist at New York Life Investments, said in a note to clients. “We are fully invested in our portfolios, using selective bets within that overall neutral-risk position to build resilience against volatility and inflation. In our equity sleeve, this includes a strong overweight to value equity and dividend payers,” Goodwin added. Jobless claims continue to tick down, showing signs of labor market strength amid recession fears. Initial jobless claims for the week ending Sept. 3 were 222,000, down about 6,000 from the previous week’s revised level according to the Labor Department. This marked the lowest number of initial claims since the week ending May 27. Continuing claims also declined, coming in at 1,414,849 for the week ending Aug. 20. Markets in Asia-Pacific were mixed following Wall Street’s solid rebound rally overnight in the best day since Aug. 10 for all three averages. Investors will also be closely watching Federal Reserve Chair Jerome Powell’s speech Thursday as markets brace for another 75 basis-point hike later this month. Japan’s Nikkei 225 closed 2.31% higher at 28,065.28 and the Topix was also 2.19% higher at 1,957.62. In Australia, the S&P/ASX 200 ended its session 1.77% higher at 6,848.7 and the Kospi in South Korea rose 0.33% at 2,384.28. In mainland China, the Shanghai Composite struggled to find direction and was 0.33% lower while the Shenzhen Component traded 0.86% lower. The Hang Seng Index also slipped 1% in the final hour of trade while the Hang Seng Tech Index also fell 1%. Oil prices edged higher on Thursday, but remained near eight-month lows, as China’s extension of COVID-19 lockdown measures exacerbated concerns a slowdown in global economic activity would hit fuel demand. Brent crude futures were up 32 cents, or 0.4%, to $88.32 per barrel, after falling to $87.24 earlier, their lowest since Jan. 25. U.S. crude futures were up 47 cents, or 0.6%, at $82.41 a barrel, after falling to $81.20, their lowest since Jan. 12. Prices drew some support from Russian President Vladimir Putin’s threat to halt oil and gas exports if price caps are imposed by European buyers. Gold struggled for momentum on Thursday as investors refrained from taking big positions ahead of a European Central Bank policy decision and comments from the Federal Reserve chairman. Spot gold was little changed at $1,717.30 per ounce, as of 0852 GMT, after rising nearly 1% in the previous session. U.S. gold futures edged 0.1% higher to $1,728.60.