As Wall Street reeled from yet another significant rate rise by Federal Reserve policymakers and anticipated the release of the government’s monthly retail survey, U.S. stock futures fell on Thursday morning.
Futures on the Dow Jones Industrial Average (DJI) lost 250 points, or 0.7%, while those on the S&P 500 (GSPC) fell 1%. Contracts on the Nasdaq Composite (IXIC), which focuses on technology, decreased by 1.3%.
Before the market opened on Thursday, Tesla (TSLA) was down another 1.7% after regulatory documents revealed CEO Elon Musk sold around 21,995,000 company shares, or about $3.6 billion, over the course of three days ending December 14. After a sell-off of the electric car juggernaut escalated recently, shares of Tesla are down around 20% so far in December and about 55% year-to-date.
Even though homebuilder Lennar (LEN) announced an 11% increase in fourth-quarter profit late Wednesday, shares of the company were down 4% in pre-market trade.
Following falls in all major averages during the previous trading day following the Fed’s announcement of a 50 basis-point hike to its benchmark interest rate, there were changes on Thursday morning. Additionally, Fed Chair Powell reaffirmed that he and his colleagues will raise rates in 2023 to a newly updated estimated terminal rate of 5.1%.
The Fed funds rate was raised by half a percentage point on Wednesday, bringing it to a range of 4.25%–4.5%, which was a slowdown from the 75-basis-point increases that were made at each of the previous four policy meetings — the most ferocious run of raises since the 1980s.
Powell was certain that there was still plenty to be done to combat persistently high inflation, notwithstanding a moderation in the rate and size of rises.
“Now that we have increased interest rates by 425 basis points this year and have entered a zone of restriction, it is less important how quickly we proceed and far more crucial to consider what the end level is,” Powell stated during a Wednesday press briefing with reporters. The issue will arise of “how long do we stay restricted” at some time.
The federal funds rate is expected to rise to between 5.1% and 5.4% in 2023 and remain at a median rate of 4.1% in 2024, according to the Fed’s “dot plot,” which displays policymakers’ estimates for interest rates. Strategists point out that this is the only significant revision to the central bank’s outlook.
Richard de Chazal, a macro analyst at William Blair, noted that these projections “are noticeably more hawkish than their previous forecasts and were not tracked well in advance as is typically the case with the Fed.”
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