Futures tied to Wall Street’s major indexes rose slightly in extended trading Wednesday after a turbulent earlier session that saw stocks reverse gains into the close after the Federal Reserve signaled interest rate hikes could come as soon as March.
The central bank held rates at near zero following a two-day policy meeting that concluded on Wednesday, citing plans to halt pandemic-era policy of asset purchases first. The Federal Open Market Committee, however, reaffirmed it will wrap up the process in early March, suggesting the first rate hike could come in six weeks.
Investors had been anticipating clarity from the Fed on measures it would take to mitigate inflation leading up to Wednesday’s statement, with uncertainty around the pace and extent of policy change weighing on markets since the start of the new year.
“While offering some clarity on how the Fed would begin the process of removing policy accommodation, the outcome of the meeting fell short in providing the needed guidance on the timing and magnitude of the shift in policy,” Charlie Ripley, senior investment strategist for Allianz Investment Management said in a note. “Today’s meeting has market participants fully convinced that a March hike is certain, but with Chairman Powell not making any timing commitments, the door is slightly open for a slower moving Fed.”
While questions around when — and how profoundly — short-term borrowing costs will be increased, the Federal Open Market Committee unanimously agreed that “it will soon be appropriate to raise the target range for the federal funds rate,” with remarks from Federal Reserve Chair Jerome Powell signaling the first increase will happen on March 16, after the central bank’s next scheduled meeting.
U.S. Federal Reserve Chairman Jerome Powell addresses an online only news conference in a frame grab from U.S. Federal Reserve video broadcast from the Federal Reserve building in Washington, U.S., January 26, 2022. U.S. Federal Reserve Board/Handout via REUTERS
“I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming conditions are appropriate for doing so,” Powell said in a press conference.“I don’t think it’s possible to say exactly how this is going to go, and we’re going to need to be, as I’ve mentioned, nimble about this.”
JPMorgan Chief U.S. Economist Michael Feroli said Powell’s comments were “arguably the most hawkish he’s made as Fed Chair.”
Powell deflected questions about whether a 50 basis point hike was on the table, including one posed by Yahoo Finance’s Brian Cheung about whether hikes would be gradual, but Powell indicated that the central bank’s moves could differ in tempo from when it began raising rates in 2015 due to the notably stronger economy and labor market and inflation running hot.
“While remaining noncommittal, Powell clearly wanted to indicate that hiking at consecutive meetings was a possibility, a risk we’ve also been flagging,” Feroli said.
On the labor front, investors will tune in for fresh unemployment data Thursday morning. The Labor Department is expected to report first-time unemployment filings slightly lower than the previous read, which reflected a three-month high amid renewed virus-related disruptions.
The Bureau of Economic Analysis is also set to release its first estimate of fourth-quarter GDP, with U.S. gross domestic product (GDP) likely higher in the final months of 2021 along still-solid consumer spending.
Here were the main moves in post-market trading ahead of the overnight session:
S&P 500 futures (ES=F): +8.25 points (+0.19%), to 4,349.75
Dow futures (YM=F): +31.00 points (+0.09%), to 34,086.00
Nasdaq futures (NQ=F): +44.00 points (0.31%) to 14,202.50
Crude (CL=F): +$0.23 (-0.26%) to $87.12 a barrel
Gold (GC=F): -$10.80 (-0.59%) to $1,818.90 per ounce
10-year Treasury (^TNX): +6.5 bps to yield 1.8480%
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc