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Futures subdued after Fed-driven selloff

Kitco News

Sept 22 (Reuters) - Wall Street futures were muted on Thursday as investors assessed the impact on U.S. economic growth from the Federal Reserve's unwavering focus to rein in inflation through aggressive interest rate hikes.

The three main indexes finished more than 1.7% lower on Wednesday, with the Dow (.DJI) posting its lowest close since June 17. The Nasdaq (.IXIC) and S&P 500 (.SPX) ended at their lowest point since July 1 and June 30, respectively.

The U.S. central bank lifted rates by an expected 75 basis points and signaled that its policy rate would rise by 4.4% by year end and top out at 4.6% by the end of 2023, a steeper and longer trajectory than markets had priced in. read more

Investors fear the aggressive path could add to volatility in stocks and bonds in a year that has already seen bear markets in both asset classes and could potentially cause an economic downturn. read more

Goldman Sachs, Barclays and a bunch of investment banks have raised their estimates for U.S. policy rates following Fed's hawkish message, with Societe Generale economists also projecting a mild recession in early 2024. read more

"There are a lot of risks at this level, but the Fed has decided that they're going to go the Volcker way, which is to stay the course and try to nip it now," said Eric Schiffer, chief executive of PE firm Patriarch Organization in California.

"I expect to see the market retest and go lower than the lows in June and get to a valuation that more clearly reflects the environment we are in."

The benchmark S&P 500 is less than 4% away from its mid-June low, its weakest point of the year. Recent set of dismal outlooks from companies including FedEx Corp and Ford Motor Co (F.N) have raised concerns about the health of corporate America.

The U.S. bond yield curve inverted further, amplifying concerns about a recession in the next one to two years.

Rate-sensitive bank stocks edged higher in premarket trading, while heavyweights such as Tesla Inc (TSLA.O), Microsoft Corp (MSFT.O) and Meta Platforms Inc (META.O) rose between 0.4% and 0.7% after tumbling in the previous session.

At 7:02 a.m. ET, Dow e-minis were up 35 points, or 0.12%, S&P 500 e-minis were up 1.5 points, or 0.04%, and Nasdaq 100 e-minis were down 4 points, or 0.03%.

Elsewhere, the yen rose sharply against the dollar after Japan intervened in the forex market for the first time since 1998 to shore up the battered currency. read more

Reporting by Sruthi Shankar, Medha Singh and Devik Jain in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta
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