Stock futures were sharply lower Thursday following the Federal Reserve’s latest policy update, as investors worried the central bank could tip the economy into a recession as it continues its fight against inflation.
Futures tied to the Dow Jones Industrial Average fell 350 points, or 1.05%. S&P 500 futures dropped 1.3%, and Nasdaq 100 futures lost 1.59%.
Tesla shares fell more than 2% in the premarket after CEO Elon Musk sold a chunk of his stake in the company.
Treasury yields declined following the most recent Fed rate hike, with the yield on the benchmark 10-year Treasury note falling below 3.5%.
Those moves follow a down session Wednesday when the Dow fell 142 points, while the S&P 500 declined 0.61% and the Nasdaq Composite dropped 0.76%.
Investors digested the Federal Reserve’s latest comments following a boost to its overnight borrowing rate. The central bank said it will continue hiking rates through 2023 and projected a higher-than-expected terminal rate of 5.1%. With Wednesday’s half a percentage point hike, the targeted range for rates is currently 4.25% to 4.5%, which is the highest in 15 years.
“Overall, we expected to hear Chair Powell emphasize that the ‘hard part’ of returning inflation to 2.0% is just beginning. We largely received that message,” Bank of America’s Michael Gapen wrote in a Wednesday note.
“The Fed remains willing to risk a recession in the labor market in order to bring inflation down and, if anything, the December projections suggest that risk has risen, not diminished. We agree and continue to look for a recession in 1H 2023 and a sharper rise in the unemployment rate than the median FOMC member projects,” Gapen added.
Despite favorable improvements like modest growth, spending and production, Powell indicated he remains concerned job gains are too robust and the unemployment rate is too good for the Fed’s fight against inflation.
Investors will get another batch of economic data to digest Thursday. Retail sales, jobless claims and Philadelphia Fed manufacturing index are all due out at 8:30 a.m. ET.
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THIS MORNING’S STOCK NEWS MOVERS:
Tesla (TSLA) – Tesla fell 1.2% in premarket trading after an SEC filing showed that Elon Musk sold another $3.6 billion in shares. The stock is down 55% year to date through Wednesday.
STOCK SYMBOL: TSLA
Warner Bros. Discovery (WBD) – Warner Bros. Discovery raised its projected costs for scrapping planned content by $1 billion to a total of $3.5 billion. The media company has been implementing cost-cutting measures since the merger of AT&T’s WarnerMedia unit and Discovery earlier this year. Warner Bros. Discovery lost 1.2% in the premarket.
STOCK SYMBOL: WBD
Lennar (LEN) – Lennar slid 2.6% in the premarket after forecasting a slowdown in orders for new homes, stemming from higher mortgage rates. The home builder also reported lower-than-expected earnings for its latest quarter, although revenue was slightly above analyst forecasts.
STOCK SYMBOL: LEN
Novavax (NVAX) – Novavax tumbled 9.2% in premarket trading after the drug maker announced a $125 million common stock offering and a $125 million offering of convertible debt.
STOCK SYMBOL: NVAX
Western Digital (WDC) – Western Digital was downgraded to sell from neutral at Goldman Sachs, which pointed to a continued downturn in the flash memory market. Western Digital declined 4.7% in premarket action.
STOCK SYMBOL: WDC
AT&T (T) – AT&T was downgraded to equal-weight from overweight at Morgan Stanley, which notes AT&T’s outperformance this year and is predicting slower growth for the company in 2023. AT&T fell 1.4% in premarket trading.
STOCK SYMBOL: T
Trade Desk (TTD) – Jefferies downgraded the digital ad firm to hold from buy, praising the company’s “best-in-class fundamentals” but noting an offset from a rich valuation multiple. Trade Desk declined 3.3% in the premarket.
STOCK SYMBOL: TTD
Snap (SNAP) – The social media company’s stock was downgraded to hold from buy at Jefferies, which said Snap is facing intense competition and a worsening macroeconomic picture. Snap lost 2.1% in premarket trading.
STOCK SYMBOL: SNAP
FULL DISCLOSURE:
/u/bigbear0083 has no positions in any stocks mentioned. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
DISCUSS!
What’s on everyone’s radar for today’s trading day ahead here at r/stocks?
I hope you all have an excellent trading day ahead today on this Thursday, December 15th, 2022! 🙂
