U.S. stock index futures fell sharply early Friday, while the U.S. dollar climbed further against other major currencies as the market continued to price in further Federal Reserve interest-rate hikes.
- Futures on the Dow Jones Industrial Average YM00, -0.98% fell 391 points, or 1.3%, to 29758.
- Futures on the S&P 500 ES00, -0.93% dropped 51 points, or 1.4%, to 3720.
- Futures on the Nasdaq 100 NQ00, -0.77% decreased 1.5%, or 158 points, to 11408.
On Thursday, the Dow Jones Industrial Average DJIA, -0.98% fell 107 points, or 0.35%, to 30077, the S&P 500 SPX, -1.13% declined 32 points, or 0.84%, to 3758, and the Nasdaq Composite COMP, -1.07% dropped 153 points, or 1.37%, to 11067.
Down for three straight sessions, the S&P 500 closed at its lowest value since June 17.
What’s driving markets
The Federal Reserve’s decision on Wednesday to raise its benchmark interest rate by three-quarters of a percentage point for the third straight time, and post an aggressive dot plot forecast of future increases, weighed on U.S. stocks again Friday. Global stock markets have also suffered as other central banks have followed suit.
Steve Englander, head of global G-10 currency research at Standard Chartered, had expected the labor market to show signs of slowing by now. The bank now forecasts a 75 basis point hike from the Fed in November and a further 50 basis point increase in December.
“Since activity has not yet responded much to tightening, the Fed does not have a particularly good estimate of how high rates need to be to achieve the desired inflation outcome. Once unemployment starts moving up, such estimates will become more feasible, but until then it is hard to produce a reliable estimate of how high rates need to be,” he said.
The dollar DXY, +0.64% continued to strengthen against major rivals. Strategists at UBS Global Wealth Management said it’s too early to bottom-fish on the euro, and they lowered their forecast for the pound, and said intervention was unlikely to halt the uptrend in the dollar versus the yen.
The pound fell to its worst reading in 37 years as traders bailed on the U.K. currency after the U.K. unveiled tax cuts financed by bond sales.
On the economic data front, a flash reading of S&P Global U.S. purchasing managers indexes for both the manufacturing and services sectors for September is due for release at 9:45 a.m. Eastern. There will also be a “Fed Listens” event, with a welcome speech from Chair Jerome Powell.