U.S. stock futures fell Friday morning to give back some gains after a three-day winning streak. However, the major equity indexes still headed for weekly advances as traders took favorably the Federal Reserve’s measured first move on raising interest rates.
Contracts on the S&P 500 declined. The index was on track to post its first weekly gain in three weeks, and its biggest since November 2020, based on closing levels from Thursday. U.S. crude oil prices rose to hold above $104 per barrel, while the 10-year Treasury yield declined to about 2.14%.
Meanwhile, shares of GameStop (GME) — the original darling of last year’s Reddit-fueled investing frenzy — sank after the retailer delivered a wider-than-expected fourth-quarter loss. Other “meme stocks” including AMC Entertainment (AMC) and BlackBerry (BB) also declined in sympathy.
FedEx’s (FDX) stock also dropped after the shipping giant posted quarterly earnings results Thursday afternoon. These reflected lower-than-expected profits, as rising labor and shipping costs more than offset FedEx’s price increases to customers.
For U.S. equity investors broadly, news this week that the Fed opted for a 25 basis point rate hike and charted out a route toward six additional rate hikes later this year helped provide clarity on the future monetary policy path and removed an overhang of uncertainty. The size of the interest rate hike was taken as a carefully considered first move, beginning the process of addressing inflation while avoiding delivering a major shock to markets already weighing Russia’s war in Ukraine.
“They took what I would consider the safe route, which was to do 25 basis points,” Sonal Desai, Franklin Templeton Fixed Income chief investment officer, told Yahoo Finance Live on Thursday. “Absent what we are seeing on the geopolitical stage right now, they probably would have gone for 50. So I definitely would not rule out a faster, more front-loaded pace of rate hikes going forward.”
And later, Fed officials may also upwardly revise its projections for where interest rates will end this year, in the event that inflation does not moderate quickly, Desai added. Based on the Fed’s projections from Wednesday, short-term interest rates would likely end the year around 1.75%.
“I could see them going up to 2% this year — we could expect, by the end of next year, looking at something closer to 3%,” she added. “So I’m looking at what the Fed has done. I think it was what as needed because it may come across as hawkish, but the Fed is enormously behind the curve at this point.”
Technology stocks in particular got a boost following the Fed’s decision, with some of the most badly beaten down growth names recovering some year-to-date losses. While some strategists suggested the bottom may have been put in for most tech stocks, others were less certain.
“We did get the hawkish statements out of the Fed [Wednesday], and even though they’re going to be stiff headwinds for tech stocks and other aggressive growth companies, the data is now known. And when it’s known, it’s absorbed in the market,” Paul Meeks, Independent Wealth Solutions Management portfolio manager, told Yahoo Finance. “The thing that I still worry about, and it keeps me away from go all-in in tech, is what’s going on in Eastern Europe, because if we still have geopolitical risks, we still have risks to these stocks.”
7:29 a.m. ET: St. Louis Fed President Bullard calls for Fed to hike rates to more than 3% this year
St. Louis Fed President Jim Bullard said Friday that he wanted the Federal Reserve to more swiftly raise interest rates and begin the process of reducing its nearly $9 trillion balance sheet in order to bring down inflation.
Bullard was the only member of the Federal Open Market Committee to dissent with the Fed’s decision this week to raise interest rates by 25 basis points. Instead, Bullard wanted the Fed to raise by 50 basis points and also implement a plan to reduce the balance sheet.
“The combination of strong real economic performance and unexpectedly high inflation means that the Committee’s policy rate is currently far too low to prudently manage the U.S. macroeconomic situation,” Bullard said in a statement. “Moreover, U.S. monetary policy has been unwittingly easing further because inflation has risen sharply while the policy rate has remained very low, pushing short-term real interest rates lower. The Committee will have to move quickly to address this situation or risk losing credibility on its inflation target.”
Bullard said that in his dot on the “dot plot,” or Fed’s Summary of Economic Projections, he saw the Fed raising rates to above 3% this year.
“This would quickly adjust the policy rate to a more appropriate level for the current circumstances,” Bullard said. “The Committee has successfully moved in this manner before. In 1994 and 1995, the Committee made a similar discrete adjustment to the policy rate to better align it with the macroeconomic circumstances at that time. The results were excellent.”
7:11 a.m. ET: Stock futures fall, giving back some gains
Here’s where markets were trading heading into the opening bell Friday morning:
S&P 500 futures (ES=F): -30.75 points (-0.7%) to 4,379.50
Dow futures (YM=F): -200 points (-0.58%) to 34,261.00
Nasdaq futures (NQ=F): -104.75 points (-0.74%) to 14,007.00
Crude (CL=F): +$1.34 (+1.3%) to $104.32 a barrel
Gold (GC=F): -$7.50 (-0.39%) to $1,935.70 per ounce
10-year Treasury (^TNX): +13.6 bps to yield 2.1400%
6:13 p.m. ET Thursday: Stock futures
Here’s where stocks were trading Thursday evening:
S&P 500 futures (ES=F): -16.25 points (-0.37%) to 4,394.00
Dow futures (YM=F): -140 points (-0.41%) to 34,321.00
Nasdaq futures (NQ=F): -48.25 points (-0.34%) to 14,063.50
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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