Written by Susan Mathew and Ankika Biswas
(Reuters) – U.S. stock index futures fell on Thursday on fears of a global economic slowdown from massive interest rate increases by central banks and potential contagion risks from turmoil in UK markets.
The Dow Jones fell for the seventh time in eight sessions, while huge growth names such as Amazon.com Inc (NASDAQ :), Apple Inc (NASDAQ :), Microsoft Corporation (NASDAQ :), Meta Platforms Inc and Tesla (NASDAQ 🙂 Inc lost between 0.9% and 2.1% in pre-market trading.
The calm caused by the Bank of England’s decision on Wednesday to buy long-dated government securities to stabilize markets was not lasted by the government’s new economic plan.
The British pound fell and bond prices fell, with the sell-off in British assets spreading to US Treasuries and higher-rated German bunds, which are considered a safe haven.
Although US stocks closed sharply higher in the previous session due to easing Treasury yields, they took a hit for much of the year as higher yields weakened the attractiveness of stocks.
“The world is transitioning from a low interest rate environment to a high interest rate environment,” said Andrea Cission, head of strategy at TS Lombard.
“The market is repricing macro risk, and obviously the catalyst this year has been the Fed and other central banks that started raising interest rates…the question about debt sustainability and financing for countries with current account deficits has become very real.”
Yields on many Treasuries, which are nearly risk-free if held to maturity, now dwarf the dividend yield, which recently stood at about 1.8%, according to Refinitiv Datastream.
At 7:01 AM ET, it was down 198 points, or 0.67%, the S&P 500 e-minis was down 31.5 points, or 0.84%, and it was down 133.75 points, or 1.16%.
American Airlines (NASDAQ:) stock fell about 1% as airlines canceled nearly 2,000 US flights for Thursday after Hurricane Ian hit Florida’s Gulf Coast with catastrophic force in one of the strongest US storms in recent years.
The share of its peers from United Airlines Holdings (NASDAQ:), Southwest Airlines (NYSE:) and Delta Airlines (NYSE:) fell between 0.1% and 1.1%.
US cruise companies Norwegian Cruise Line (NYSE:): Holdings Ltd and Carnival (NYSE:): Corp fell 1.6% and 1.9% after they postponed or canceled cruises in anticipation of the hurricane.
Investors will be watching weekly jobless claims, which are expected to rise by 2,000 to 215,000 last week. Final economic growth figures for the second quarter are also due to be released.
The government’s second estimate last month showed the economy shrank by 0.6%, a more moderate pace than initially thought.
Comments from Fed Chair Loretta Meester on inflation will be on the investor watchlist.