March is too early for a rate hike according to analysts.
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The US stock futures were wavering Thursday as they struggled to recover from a global sell-off caused by signs the Federal Reserve is ready to be more aggressive on interest rate rises.
The futures were down at 6:10 a.m. Technology stocks were the focus of Wednesday's decline. The S&P 500 futures were up 0.05%, suggesting a cautious start to trading later in the day.
The Fed's December meeting minutes burst the early-year calm in markets. Officials agree that a tight job market and high inflation mean they may not wait for more people to return to work before hiking interest rates.
In December, the US central bank said it would double the pace of its bond purchases and raise interest rates three times in the next five years to cool inflation.
The minutes suggest that the Fed might reduce its balance sheet as opposed to simply pulling back on its emergency asset buying in order to cut the amount of market liquidity.
Simon Harvey said that the Fed's view on balance sheet reduction was the most notable development in the minutes.
The major US stock indices retreated after the minutes, with the tech-focused Nasdaq falling 3% for its biggest daily drop in nearly a year. The S&P 500 fell 2% on Wednesday, after a two-week rally in which the index rose 5%.
The US markets were lower. London's FTSE 100 lost 0.4%, the Euro Stoxx 600 was down 0.9%, and the Frankfurt's DAX fell 0.9%.
The US losses hurt the outlook for corporate profit growth in the region. Tokyo's Nikkei fell 2.8% while the Shanghai Composite fell 2%. The Hang Seng in Hong Kong increased by 0.7%.
Tech companies and real-estate names are sensitive to rising interest rates. Higher long-term rates can affect earnings estimates for high-growth businesses and turn bonds into safer investments.
The 10-year US Treasury yield rose to 1.73% on Thursday, its highest level since April 2021, after surging to 1.71% after the Fed news.
The Fed might make its first interest-rate hike this year. ING analysts James Knightley and Padhraic Garvey said that March is too early for a rate increase, but that May is likely.
"With several participants noting that the maximum employment objective has largely been met, and uncertainty over the recovery in the participation rate in the coming months, jobs data will be key in determining whether the growing consensus in money markets for lift-off at March's meeting is the correct bet," Harvey
The monthly US jobs report for December is due Friday. Private-sector job growth data from the ADP out Wednesday came in at double the estimates and much better than November's reading.
It was the worst day since the flash crash of December 4 when it fell as much as 8.5%. The Fed's rate hike puts at risk the money that has flowed into asset classes.
Market participants can expect some peaks and troughs along the way, as markets never move in a straight line, and investors can expect to see cryptocurrencies rebound to an upward trajectory.
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Business Insider has an original article.
