Futures little changed following Fed's hawkish stance

[January 27, 2022]  By Bansari Mayur Kamdar

(Reuters) - Wall Street futures treaded water on Thursday, following hawkish comments from the Federal Reserve in the previous session, while attention turned to quarterly results from growth companies and final quarter GDP data.

U.S. short-term government bond yields rocketed to their highest in 23 months after the Fed stuck to plans for a rate hike in March and Chair Jerome Powell warned that inflation may be more persistent than previously thought.

Fed funds futures showed traders pricing in as many as five rate increases by December, after previously fully pricing for four.

Adding to investor concerns were festering geopolitical tensions in Ukraine. The U.S. said on Wednesday it faced challenges in finding alternative energy sources to Europe if Russia invades Ukraine and energy flows from Russia are interrupted.

The S&P 500 index nosedived in the previous session reversing all its early gains amid volatile trading, flirting with a correction for its third straight session.

The bellwether index would have to close 10% or more below its record closing high reached on Jan. 3, to confirm it entered correction territory. It ended the session 9.3% below that level on Wednesday.
 

Investors are also keeping an eye out for data due at 08:30 a.m. ET that is expected to show U.S. economic growth likely accelerated in the fourth quarter as businesses replenished depleted inventories to meet strong demand for goods.

Some are worried that a more hawkish Fed could hurt recovery, even theorizing a sharp economic slowdown or even the next recession.

A screen displays the Fed rate announcement as a specialist trader works at his post on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 26, 2022. REUTERS/Brendan McDermid

Meanwhile, the fourth-quarter earnings season is in full swing with analysts expecting earnings from S&P 500 companies to grow 24.4% year-over-year, according to Refinitiv, as of Wednesday.

Tesla Inc slipped 1.1% after warning that supply chain issues will last throughout 2022, while chipmaker Intel Corp fell 2.7% on its downbeat first-quarter earnings forecast due to global supply chain problems.

Other megacap growth companies like Apple, Meta Platforms and Alphabet edged higher, up nearly 0.2% each. Apple is set to report results after markets close.

At 6:47 a.m. ET, Dow e-minis were down 28 points, or 0.08%, S&P 500 e-minis were down 1.75 points, or 0.04%, and Nasdaq 100 e-minis were up 3 points, or 0.02%.

Netflix Inc gained 4.4% as billionaire investor William Ackman amassed a new stake in the streaming service company worth more than $1 billion since its stock price tumbled starting last Thursday.

Levi Strauss & Co jumped 7.6% after forecasting annual sales and profit above estimates, bolstered by higher prices and strong demand for its jeans and jackets.

(Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Shounak Dasgupta)

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