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U.S. equity futures bumped higher in early Thursday trading , while the dollar held near two-year highs and Treasury yields jumped, as markets extended their reaction to yesterday’s surprisingly hawkish Federal Reserve rate decision.
The S&P 500 slumped to a one-month low by the close of trading Wednesday, giving back nearly 3% from the prior session and shedding around $1.8 trillion in market value in the wake of the Fed’s final rate cut of the year.
The selloff, the biggest post-Fed decline on record, was tied to the central bank’s forecast of just two rate cuts through the whole of 2025, around half their September estimate, amid what it called “somewhat elevated” inflation and resilient domestic economy.
“The Fed meeting brought back some unwanted clouds of uncertainty over monetary policy next year,” said Adam Turnquist, chief technical strategist for LPL Financial in Charlotte.
“At a minimum, market expectations have shifted toward a shallower- and slower-than-anticipated rate-cutting cycle,” he added. “Technically, the near-term risk remains to the upside for 10-year Treasury yields, creating a likely headwind for stocks.”
Benchmark 10-year note yields, which were trading at around 4.391% prior to the Fed decision yesterday, were last marked at 4.522% in overnight trading, with 2-year notes trading at 4.319%.
The U.S. dollar index, which surged to a two-year high against a basket of its global peers following yesterday’s rate cut, was last marked 0.13% lower at 107.892.
Heading into the start of the trading day on Wall Street, stock futures suggest a modest rebound from last night’s selloff, with contacts tied to the S&P 500 priced for a 13 point opening bell gain.
Related: Fed rate cut bets crumble after December policy meeting
Those linked to the Dow Jones Industrial Average, which extended its losing streak to ten consecutive sessions, the longest since 1974, at the close last night, are priced for an 85 point advance. The tech-focused Nasdaq is called 50 points higher.
Stocks on the move include Micron Technology (MU) , which slumped 15% in premarket trading following a disappointing near-term outlook for the memory chip market from last night’s quarter earnings.
FedEx (FDX) shares were also active, rising 0.11% ahead of the package delivery group’s second quarter earnings after the closing bell.
In overseas markets, Europe’s Stoxx 600 was marked 1.33% lower in Frankfurt in a follow-on move to last night’s selloff on Wall Street, while Britain’s FTSE 100 was marked 1.4% lower ahead of today’s Bank of England rate decision.
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Overnight in Asia, the Bank of Japan left its benchmark lending rate unchanged at its final policy meeting of the year, with Governor Kazuo Ueda hinting that rate hikes in January are unlikely, sending the yen sharply lower against the dollar.
The Nikkei 225 closed 0.69% lower while the region-wide MSCI ex-Japan benchmark fell 1.4% into the close of trading.
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