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Market Snapshot: U.S. stock futures slip, as Fed-inspired relief rally loses some steam

U.S. stock index futures slipped Thursday, indicating equities were set to give back some of the sharp gains seen after a Federal Reserve interest rate hike sparked a sharp relief rally.

What’s happening

Futures on the Dow Jones Industrial Average
YM00,
-0.50%

fell 157 points, or 0.5%, to 33,812.

Futures on the S&P 500
ES00,
-0.69%

dropped 27.75 points, or 0.5%, to 4,267.50.

Futures on the Nasdaq 100
NQ00,
-0.94%

were down 119.25 points, or 0.9%, at 13,412.

On Wednesday, the Dow
DJIA,
+2.81%

surged 932 points, or 2.8%, while the S&P 500
SPX,
+2.99%

soared 2.99% and the Nasdaq Composite
COMP,
+3.19%

advanced 3.2%. The S&P 500’s gain was the largest one-day advance since May 18, 2020.

What’s driving markets

Powell on Wednesday said the central bank was not likely to hike its benchmark interest rate by 75 basis points at its next meeting, a comment that immediately sent stocks higher and the dollar
DXY,
+0.71%

and Treasury yields
TMUBMUSD10Y,
2.953%

lower.

But Powell was hardly dovish, all but promising consecutive 50 basis rate hikes, and saying it would take a cooling in red-hot inflation or a deteriorating jobs market for the Fed to slow down the pace of rate increases, and even then only by 25 basis point increments.

“We need to really see that our expectation is being fulfilled, that inflation in fact is under control and starting to come down, but it’s not like we would stop, we would just go back to 25 basis point increases,” said Powell.

Kit Juckes, a macro strategist at Societe Generale, said comments from St. Louis Fed President James Bullard had left the impression that a 75-basis-point rise was possible.

“If the post-FOMC equity rally lasts more than one day, they can call it the Bullard Rally, because he implanted the idea of a 75 bp rate hike into the market’s consciousness, allow Jay Powell to hike by 50bp and seem dovish at the same time,” said Juckes.

Meahwhile data showed first-time U.S. jobless claims rose 19,000 last week to 200,000. U.S. productivity fell at a 7.5% annual rate in the first quarter, the biggest drop since 1947. Unit-labor costs jumped at an 11.6% annual pace in the first quarter.

A wave of corporate earnings is due from companies including Shopify SHOP, Kellogg K, and after the close, Zillow Z and Shake Shack SHAK.

Companies in focus

Saudi Arabian investor Prince Alwaleed bin Talal, who had previously spurned Elon Musk’s bid for Twitter Inc.
TWTR,
+0.39%
,
now is planning to keep his 35 million-share stake in the company after the merger, according to a new Securities and Exchange Commission filing from Musk. Musk also detailed $7.2 billion in equity commitment letters, including $1 billion from Larry Ellison, the co-founder of Oracle, as well as the crypto exchange Binance and Qatar’s sovereign-wealth fund. Shares rose 2.2%.

Shopify Inc.
SHOP,
+4.36%

shares fell after the company reported a loss in the first quarter and announced the acquisition of Deliverr Inc. in a deal valued at $2.1 billion.

Shares of Kellog Co.
K,
+1.31%

rose after the food company reported first-quarter earnings that beat expectations and raised its guidance.

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