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US stocks fall as hawkish Fed fears are re-ignited following a week of stronger-than-forecast data and hawkish Fed comments.
 

US futures

• Dow futures -0.35% at 33580
• S&P futures -0.55% at 4067
• Nasdaq futures -0.72% at 12350

In Europe

• FTSE -0.18% at 79994
• Dax -0.65% at 15440 
   

50 basis point rate hikes?

Stronger-than-expected data has continued into Thursday, sending futures lower ahead of the open.

US futures are heading lower in risk-off trade after hawkish comments from Fed and ECB officials, which have fuelled bets of higher interest rates for longer.

The sell-off in U.S. stocks comes after a 1% decline on Thursday after PPI came in hotter than expected and as Fed president Loretta Mester and James Bullard ramped up the hawkish rhetoric. Both policymakers were supportive of returning to 50 basis point hikes.

After an optimistic start to 2023, February is proving to be a much more troubling month for stocks. In light of the blowout jobs report, hotter than expected inflation, and a rebound in retail sales, the market is now starting to price in three more 25 basis point rate hikes over coming Fed meetings, up from a previously expected two more rate hikes.

With inflation proving to be stickier than expected, a terminal rate of 5.5%, is looking very plausible, which is up from expectations of a terminal rate of 5% at the start of the month.

The data is forcing the market to finally pay attention to what the Fed has been saying. That rates need to rise further and stay high for longer to rein in inflation, which is still too high.
 

Corporate news

Manchester United share prices rise to a record high on hopes that multiple bidders will battle to take over the club.

Door Dash right it's a 5% pre-market after the online food delivery company but reported robust Q4 growth and forecast strong future orders. it also announced a $750 million stock buyback.
 

Where next for the S&P500?

The S&P rebounded lower after hitting resistance at 4150 and is now looking to test support at 4050, last weeks’ low. A break below here, combined with a bearish crossover on the MACD, keeps sellers hopeful of further losses towards the 100 sma at just over 4000 and the 200 sma at 3944. On the flip side, should buyers successfully defend the 4050 level, the price could rise back up towards 4150 and 4175 the weekly high with a rise above here creating a higher high and opening the door to 4195 the February high.

(Click on image to enlarge)

FX markets – USD rises, GBP drops

The USD is rising, reaching a six-week high, boosted by bets that the Fed will raise interest rates higher and for longer in order to tame inflation, which is proving to be stickier than expected.

EUR/USD has fallen sharply to a six-week low on the back of the stronger you S dollar and as investors look past hawkish ECB comments. acb governing council member Isabel Schnabel says that she sees the risk of markets underestimating inflation and considers that the central bank may need to act more forcefully. she considers A50 basis point rate hike necessary in March under virtually all scenarios.

GBP/USD has fallen below 120 and is on track to lose 1% this week. stronger than expected retail sales have failed to boost the pound. Retail sales rose 0.5% MoM in January, after falling 1% in December while beating forecasts of -0.3%. This week could have been a key week for providing direction for the March MPC meeting. However, the cooler-than-forecast inflation, strong wage growth, and rising retail sales leave us non-the wiser as to the BoE’s plan for monetary policy.

• EUR/USD -0.38% at 1.0649
• GBP/USD -0.41% at 1.1985
   

Oil on track for a weekly decline

Oil prices are falling for a sixth straight session and run track to lose just shy of 5% across the week, reversing some of last week’s 9% gains. Expectations that the Federal Reserve will tighten monetary policy further in order to rein in inflation has boosted the USD, making oil more expensive for buyers with foreign currency, and has raised concerns about an economic slowdown that could hit oil demand.

Oil has traded in a choppy manner across the first six weeks of this year as investors way up inflation and recession concerns against optimism surrounding a pickup in demand from China, the world’s largest oil importer.

China is expected to import a record amount of crude oil in 2023 as activity ramps up following the easing of Covid restrictions.

• WTI crude trades -3.5% at $76.30
• Brent trades at -2.8% at $85.06 
   

Looking ahead

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