Nasdaq, S&P Futures Plunge As Fed's Hawkish Tone Deflates Risk Appetite: Retail Sales, Manufacturing Data, Tesla, Novavax In Focus

Zinger Key Points
  • Fed's hawkish commentary has impaired risk appetite in the market.
  • A slew of economic data is due in the session, offering additional clarity to the economic outlook and, in turn, rate trajectory.

Stocks look set to start Thursday’s session notably lower as traders are left to ponder the hawkish tone orchestrated by the Federal Reserve.

On Wednesday, the Fed announced a 50-basis-point hike in the fed funds rate, playing in line with expectations. The dot plot released by the central bank, however, showed rate hikes continuing through 2023, and this spooked investors.

The major averages, which were trading notably higher going into the Fed decision, plunged sharply after the event and Chair Jerome Powell’s press conference. Despite recouping some of the losses by the close of trading, the indices still ended moderately lower.

U.S. Indices' Performance On Tuesday
Index Performance (+/-)   Value
Nasdaq Composite -0.76%   11,170.89
S&P 500 Index -0.61%   3,995.32
Dow Industrials -0.42%   33,966.35

The Fed is uncertain about the future path for inflation and therefore, has remained decidedly hawkish on rates, said Jeffrey Roach, chief economist at LPL Financial. He, however, did not rule out the possibility of the Fed revising its expected peak fed funds rate as inflation, including the sticky components, starts to moderate.

“Looking ahead, investors need to watch the inflation path for non-housing core services, which is closing tied to labor market conditions,” the economist said.

Here’s a peek into index futures trading:

U.S. Futures' Performance On Thursday During Premarket Session
Index Performance (+/-)  
Nasdaq 100 Futures -1.21%  
S&P 500 Futures -1.01%  
Dow Futures -0.77%  
R2K Futures -0.76%  

In premarket trading on Thursday, the SPDR S&P 500 ETF Trust SPY slumped 0.96% to $395.56 and the Invesco QQQ Trust QQQ slumped 1.19% to $283.10, according to Benzinga Pro data.

On the economic front, the Commerce Department is scheduled to release its retail sales report for November at 8:30 a.m. EST. Economists, on average, expect the month-over-month change in retail sales to show a 0.1% drop compared to a 1.3% increase in October.

The results of two regional manufacturing surveys are due at 8:30 a.m. EST. The Philadelphia Fed’s manufacturing survey for December is expected to show the sector continued to be in contraction territory. The manufacturing index is expected to come in at -10, although improving upon November's -19.4. The business conditions index of New York’s Empire State manufacturing survey is expected to slip to -1 in December from 4.50 in November.

The Labor Department is set to release its customary weekly jobless claims report at 8:30 a.m. EST. The number of individuals claiming unemployment benefits is expected to remain unchanged at 230,000 for the week ended Dec. 10.

The Federal Reserve is scheduled to release its industrial production report for November at 9:15 a.m. EST. The consensus estimate calls for a 0.1% month-over-month dip in output compared to a 0.1% increase in October.

The Commerce Department will also release its business inventories report at 10 a.m. EST.

The Treasury will auction 4-week and 8-week bills at 11:30 a.m. EST.

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Stocks In Focus:

  • Tesla, Inc. TSLA fell close to 3% in premarket trading on the news of more share sale by CEO Elon Musk.
  • Novavax, Inc. NVAX tumbled over 10% in reaction to the company's announcement concerning stock and debt offerings to raise $250 million.
  • Warner Bros. Discovery, Inc. WBD slipped over 2.5% after the media giant raised its estimate for content write-off expenses by $1 billion to up to $3.5 billion.
  • Tech stocks moved to the downside, led by Nvidia Corp. NVDA amid the increase in risk aversion.
  • Chinese internet tech companies Alibaba Group Holding Limited BABA, JD.com, Inc. JD and Pinduoduo, Inc. PDD all declined over 2.5%.
  • Jabil, Inc. JBL is scheduled to release its fiscal year 2023, first quarter results before the market open.

Commodities, Other Global Equity Markets:

A barrel of WTI-grade crude oil traded down marginally at $77.27, snapping a three-session winning streak.

The major Asia-Pacific markets closed lower, tracking the negative lead from Wall Street overnight. Wednesday’s hawkish Fed commentary sapped the risk appetite of traders.

European stocks were sharply lower ahead of rate decisions by the Bank of England and the European Central Bank. Both the central banks are expected to raise rates by 50 basis points each to 3.50% and 2.50%, respectively. The Swiss Central Bank announced earlier in the day a rate hike of a similar magnitude.

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Posted In: EarningsMacro Economic EventsNewsFuturesPreviewsSmall CapTop StoriesEconomicsFederal ReservePre-Market OutlookMarketsTrading IdeasInflationJerome Powell
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