US pre-open: Stocks seen lower as investors digest Fed amid trade war fears
By Michele Maatouk
Date: Thursday 22 Mar 2018
(ShareCast News) - US futures pointed to more losses on Wall Street at the open on Thursday, with investors likely to continue mulling over the latest policy announcement from the Federal Reserve a day earlier amid worries about a trade war.
At 1030 GMT, Dow Jones Industrial Average and S&P 500 futures were down 0.6%, while Nasdaq futures were 1% weaker.
Stocks ended in the red on Wednesday after the Fed lifted rates by 25 basis points as widely expected, to a target range of 1.5% to 1.75%, and signalled that rates would rise twice more this year and three times in 2019.
Fed chair Jerome Powell said at the press conference: "We're trying to take the middle ground. On the one hand the risk is we wait too long and then we have to raise rates quickly, and that foreshortens the expansion. We don't want to do that.
"One the other side if we raise rates too quickly inflation doesn't get sustainably up to 2pc and that will hurt us going forward. We need that, we need to make sure inflation expectations are anchored.
"The middle ground consists of further gradual increases in the Federal Funds Rate as long as the economy is broadly on this path."
Goldman Sachs said there was "something for everyone" in the FOMC meeting.
"On the dovish side, the committee downgraded the near-term growth assessment and narrowly kept to a three-hike median for 2018. On the hawkish side, the committee noted an improved outlook, significantly upgraded its growth and employment forecasts, projected an inflation overshoot in 2019-2020, and steepened its post-2018 funds rate path by more than we and probably most others had expected.
"When all was said and done, the market took the meeting outcome as slightly dovish, with bond yields and the dollar both lower on the day."
It wasn't just the Fed keeping investors on edge though, as worries about a possible trade war weighed on sentiment amid news that President Trump's administration is planning to announce a package of punitive measure later in the day that include tariffs on Chinese imports worth at least $30bn.
Oanda analyst Craig Erlam said: "Donald Trump seems intent on starting trade wars, most notably with China, which could trigger a wave of protectionism and drive up prices in the US and likely weigh on the growth momentum.
"How the central bank deals with this will be very interesting given the already fast pace of hikes. Policy makers may well be feeling very happy with the decision to get ahead of the curve with tightening as it affords them the ability to maintain gradual hikes now."
In corporate news, Facebook was likely to remain in focus as chief executive Mark Zuckerberg vowed to change the company in the wake of the Cambridge Analytica scandal. Zuckerberg said the group is taking actions to ensure the Cambridge Analytica data exploit doesn't happen again and that it will investigate any apps that have access to large amounts of data.
On the macroeconomic front, initial jobless claims are at 1230 GMT, while Markit's composite, manufacturing and services PMIs are due at 1345 GMT.
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