Stock futures drift, oil rises as Wall Street digests Fed rate hike

U.S. stock futures stumbled in pre-market trading Thursday following a pivotal session on Wall Street marked by the Federal Reserve’s long-anticipated move to hike short-term interest rates for the first time in three years.

Contracts tied to the S&P 500, Dow and Nasdaq dipped ahead of the open after all three indexes closed higher Wednesday as investors digested the move. Futures tied to the S&P 500 were down 0.3% as of 7:00 a.m. ET to 4,344.50 , and the Dow shed about 90 points to 33,968.00. Nasdaq futures edged 0.4% lower to 13,899.00. Meanwhile, WTI Crude Oil futures gained 4.4% to near $100 per barrel.

At the end of its two-day policy-setting meeting, the central bank revealed Wednesday that it will lift the benchmark Federal Funds Rate by 0.25%, to a target range of 0.25% to 0.50%. The move was in line with what market participants had anticipated after Fed Chair Jerome Powell indicated in Congressional testimony earlier this month a 25 basis-point bump was distinctly possible.

​​“By raising interest rates, the Federal Reserve has begun the process of unwinding their pandemic-era stimulus measures in an effort to tame inflation,” Bankrate chief financial analyst Greg McBride said in a note. “This isn’t a one-and-done but the start of a series of rate hikes for the remainder of this year and well into next.”

The Fed also unveiled in its updated Summary of Economic Projections, or “dot plot,” which reflects the individual economic projections of policymakers on the Federal Open Market Committee, that the median member anticipates up to six more rate hikes in 2022, which would bring rates 1.75% higher at the end of this year. Before Wednesday’s decision, the benchmark interest rate was deliberately held near zero since mid-2020 as part of the Fed’s easy-money policies used to keep financial conditions running smoothly during the pandemic.

“The Fed didn’t rock the boat much,” LPL Financial chief market strategist Ryan Detrick said. “Yes, they lowered economic expectations in 2022 while also increasing inflation, but much of that was already priced into things. Overall, they still see strong growth, which helps support the recovery.”

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Although the key decision provided some clarity to investors who for months have awaited for the central bank to take steps forward on tightening monetary conditions, the Fed’s path forward remains muddied by geopolitical turmoil in Eastern Europe. War in Ukraine and penalizing sanctions against Russia for its invasion of the country have raised uncertainty in recent weeks over the conflict’s toll on the global economic picture.

The Fed acknowledged in a statement that came out of its meeting that implications for the U.S. economy are “highly uncertain” but likely to worsen already decades-high inflationary pressures.

“Playing catch up is the theme that Fed officials signaled to markets today as the narrative has shifted from normalizing monetary policy to laying the groundwork for a more restrictive policy and moving beyond neutral,” Allianz Investment Management senior market strategist Charlie Ripley said in commentary.

Elsewhere in markets, shares of Warren Buffett’s Berkshire Hathaway closed at $500,000 for the first time on Wednesday. The price underscored Berkshire’s status as a defensive stock at a time markets have been roiled by economic and geopolitical uncertainty.

Berkshire’s Class A shares have advanced 10% in 2022, even as the S&P 500 is down about 12% year-to-date. Prior to a relief rally on Wednesday, the benchmark index on Tuesday (the 50th trading day of the year) locked in its 6th worst start to a year ever, data from LPL financial reflected. The silver lining? The previous five worst starts were followed by notable gains, with an average gain for the rest of the year of 36%, with the exception of only 2001.

“Although we aren’t expecting 36% gains the rest of this year, it does suggest that things might be quite bad now, but we’ve been here before and we’ve seen stocks come back way more than expected,” LPL’s Detrick said.

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9:03 a.m. ET: New U.S. home construction rebounds to strongest pace since 2006

U.S. housing starts in February rose to the strongest pace since 2006, pointing to better success by homebuilders navigating material and labor snafus during the month.

Residential starts jumped 6.8% last month to a 1.77 million annualized rate, according to data out of Washington out Thursday. Applications to build, a measure of future construction, abated to an annualized 1.86 million units but remained elevated overall.

Economists surveyed by Bloomberg estimated a pace of 1.7 million for housing starts in February.

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8:30 a.m. ET: Jobless claims fall to 214,000 in latest weekly data

Applications for unemployment insurance fell in the latest weekly data to extend a broader trend downward after surging COVID-19 infections earlier this winter briefly disrupted the labor market’s recovery to start the year.

The Labor Department latest weekly jobless claims report showed 214,000 claims were filed in the week ended March 12, coming in better than the 220,000 economists surveyed by Bloomberg had expected.

Jobless claims came in below 250,000 for a seventh consecutive week and hovered around pre-pandemic levels. Continuing claims, which track the total number of individuals claiming benefits across regular state programs, have held well below levels from even before the pandemic, coming in under 1.5 million for four straight weeks now compared to an average of around 1.7 million per week in 2019.

Although COVID’s impact on the labor market has appeared to ease, the economic toll the war in Eastern Europe may have remains unclear.

“Staggeringly high inflation is set to go higher in forthcoming reports because of impacts from Russia’s invasion of Ukraine and continuing supply chain disruptions including in China,” Mark Hamrick, senior economic analyst at Bankrate, wrote in an email. “These higher costs crimping household budgets risk dampening consumer discretionary purchases. It remains to be seen how much this could negatively affect the job market in the months to come.”

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7:03 a.m. ET: Futures slip, oil rises as investors continue to weigh rate hike

Here’s how markets fared ahead of the open Thursday

• S&P 500 futures (ES=F): -9.00 points (-0.21%) to 4,349.00

• Dow futures (YM=F): -67.00 points (-0.20%) to 33,992.00

• Nasdaq futures (NQ=F): -32.00 points (-0.23%) to 13,921.00

• Crude (CL=F): +$4.20 (+4.42%) to $99.24 a barrel

• Gold (GC=F): +$35.20 (+1.84%) to $1,944.40 per ounce

• 10-year Treasury (^TNX): +2.8 bps to yield 2.1880%

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6:02 p.m. ET Wednesday: Futures tick up after stocks close higher following Fed decision

Here’s where stock futures were ahead of the overnight session Wednesday:

• S&P 500 futures (ES=F): +8.25 points (+0.19%) to 4,366.25

• Dow futures (YM=F): +51.00 points (+0.15%) to 34,110.00

• Nasdaq futures (NQ=F): +29.25 points (+0.21%) to 13,982.25

• Crude (CL=F): +$0.30 (+0.32%) to $95.34 a barrel

• Gold (GC=F): +$17.00 (+0.89%) to $1,926.20 per ounce

• 10-year Treasury (^TNX): +2.8 bps to yield 2.1880%

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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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