Written by Ankika Biswas and Devik Jain
(Reuters) – Wall Street’s major indices were set to open lower on Friday as investors worried about the potential for an economic slowdown and corporate earnings hit by the U.S. Federal Reserve’s aggressive policy-tightening moves to calm price pressures.
The US central bank raised interest rates by a widely expected 75 basis points on Wednesday and signaled a longer policy rate path, dashing hopes that the Fed expects to control inflation in the near term.
“As we head toward lower inflation and an economic slowdown, it probably won’t fall off the cliff…to some extent investors won’t view that as good news, who want to try to get through this transition period,” said Rick Meckler, partner at Cherry Lane Investments in New York. Vernon, NJ: “ASAP.”
“There is very little positive news at the moment and that could lead to some sort of eventual selling… It is certainly possible that we could approach lows in the near term.”
The Dow is 1.43% off its mid-June lows, with futures suggesting that the blue-chip index could retest that level, its weakest point for the year, if losses continue after the market opens.
The S&P 500 and Nasdaq are already in a bear market and are down more than 21% and 29%, respectively, so far this year, amid concerns over a host of issues including the conflict in Ukraine and tightening financial conditions around the world.
The bleak outlook from a handful of companies – most recently FedEx Corp (NYSE 🙂 and Ford Motor (NYSE :)) – have also added to the problems in a period of seasonal weakness in markets.
At 8:26 AM ET, it was down 336 points, or 1.11%, down 44.75 points, or 1.19%, and down 141 points, or 1.22%.
All three major indices closed lower for the third consecutive session on Thursday, tracking sharp weekly losses amid concerns that the Fed’s upbeat move could push the US economy into recession.
“The possibility of a US recession in 2023 is increasing due to the Fed’s optimism. While earnings estimates are widely understood to be very high given these downside risks, the market is unlikely to be able to consider lower earnings.” City Group (NYSE 🙂 said in a note.
Goldman Sachs (NYSE: 🙂 lowered its year-end 2022 target for the benchmark by about 16% to 3,600 points, down 4.2% from current levels.
Technology and growth stocks were among the biggest losers in pre-market trading, with megacap names including Alphabet (NASDAQ :), Apple Inc (NASDAQ :), Amazon.com (NASDAQ :), Microsoft Corporation (NASDAQ:) and Tesla (NASDAQ: Inc) all fell more than 1% as benchmark Treasury yields were at an 11-year high.
Morgan Stanley (NYSE:) down 1.8% to lead losses among the major banks.
Costco Wholesale Corp. (NASDAQ:) fell 2.2% after the major retailer reported lower profit margins for the fourth quarter, while battling rising shipping and labor costs due to rising inflationary pressure and global supply chain hurdles.
The CBOE Volatility Index, also known as the Wall Street Fear Barometer, rose to 28.72 points.
Meanwhile, Federal Reserve Chairman Jerome Powell is set to give opening remarks on the transition to a post-pandemic economy at an event at 2 p.m. ET.
On the data front, investors will be watching closely the quick reading of business data from S&P Global (NYSE:) at 09:45 AM ET.