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Stock futures mixed after Fed update and ahead of more economic data

The yield curve shows that the market has faith in the Fed, says Jefferies' David Zervos

Stock futures were mixed Thursday morning after the Federal Reserve’s latest policy update.

Futures linked to the Dow Jones Industrial Average returned 44 points. S&P 500 futures rose 0.1% and Nasdaq 100 futures were fractionally lower.

In regular trading, the Dow fell 142 points, while the S&P 500 fell 0.61% and the Nasdaq Composite fell 0.76%.

The major indexes reacted negatively as investors digested the Federal Reserve’s latest comments after an overnight interest rate hike. The central bank said it will continue to raise interest rates through 2023 and projects a higher-than-expected terminal rate of 5.1%. With Wednesday’s half-percentage-point increase, the target range for interest rates is currently 4.25% to 4.5%, the highest in 15 years.

“The Fed just put a roadblock in front of Santa’s sleigh,” said Sylvia Jablonski, managing director and chief investment officer of Defiance ETFs.

She also noted the tone of Fed Chair Jerome Powell, who in his speech Wednesday afternoon sounded “stern” and made it clear that he “doesn’t have a plan to take a break or take a reversal path.”

“It’s going to be higher for a longer time and monetary policy is going to be more restrictive than expected,” Jablonski said. “The market is going to be handicapped by Fed policy for a while longer. While we like the news and like to see CPI prints like the last one that led to a short-term rally, this is going to give us some volatility in the short term.”

Despite favorable improvements such as modest growth, spending and output, Powell indicated he remains concerned that job gains are too robust and the unemployment rate too good for the Fed’s fight against inflation.

Investors will have a new batch of economic data to digest on Thursday. Retail sales, jobless claims and the Philadelphia Fed manufacturing index are all due at 8:30 a.m. ET.

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