6.30am: Recessionary fears weigh on sentiment
Wall Street is expected to open lower after a slew of poor economic data on Wednesday heightened fears that the US is heading into recession, with the Federal Reserve still intent on raising interest rates.
Futures for the Dow Jones Industrial Average fell 0.6% in Thursday pre-market trading, while those for the broader S&P 500 index dropped 0.7%, and contracts for the Nasdaq-100 also declined 0.7%.
Markets ended sharply lower on Wednesday following the release of worse-than-expected industrial production and retail sales data for December. Despite producer inflation numbers for that month also coming in softer than expected, the Fed reiterated its stance yet again for a likely terminal interest rate of over 5%
At the close the DJIA was down 1.8% at 33,297, the S&P 500 fell 1.6% to 3,929 and the Nasdaq Composite shed 1.2% to 10,957, snapping a seven-day winning streak.
“The S&P 500 had its worst day in a month and the Dow Jones faded by more than 600 points as investors booked profits following a decent run-up in the first two weeks of January,” commented Neil Wilson at Markets.com. “After a blistering start to the year, it’s not a great surprise that some softer economic data is an excuse to sell.”
“But bad news is not just yet translating into good news as the Fed is not for budging from its agenda just yet,” Wilson continued. “Whilst markets still think the Fed is going to cut later this year, even the most optimistic investors realise it’s not done with hiking yet.”
News that Microsoft is planning to cut 10,000 jobs and a series of weak earnings reports also didn’t help the market’s mood, commented AJ Bell investment director Russ Mould.
“For once bad news really was bad news, rather than a positive because of the implications it might have for interest rates,” Mould said. “Weak US retail sales suggested consumers’ resilience may have been pushed beyond breaking point. This undermined the hypothesis of a ‘soft landing’ for the US economy with inflation easing before rates have inflicted too much pain.”