Stock futures fell on Thursday, a day after the Federal Reserve boosted interest rates by another 25 basis points. Traders also struggle with recurring fear of contagion in the regional banking space.
Futures of the Dow Jones Industrial Average declined by 0.3% or 131 points. S&P 500 futures declined by 0.4%, while Nasdaq 100 declined by 0.1%.
PacWest shares are down more than 38% in premarket trading. The drop came after it was revealed that the California-based bank was considering strategic options, including a potential sale, a familiar person told CNBC. Regional bank stocks sold off sharply, with Western Alliance falling to 19.2% and Zion Bancorporation declining by 11.3%.
According to the CEO of Double Line, Jeffrey Gundlach, there will likely be no relief for the region’s troubled banking sector until the Feds break down interest rates. Since Silicon Valley Bank closed in March, First Republic has joined ailing institutions and was recently acquired by JPMorgan Chase.
“if the stake stays this high, the stress will continue,” Gundlach announced on Wednesday on CNBC’s Closing Bell program. “There will be a high probability of more regional bank failures.”
Chairman Jerome Powell announced that it might be too early to cut rates as the Fed made its 10th rate boost this cycle, and the central bank appeared to be softening its stance on future rate hikes.
“Our view in committee is that inflation will not come down anytime soon,” he said at the press conference after the meeting. “It will take time, and in this world, if that forecast is fundamentally correct, it would not be suitable to cut rates, and we will not cut them.
Shares closed lower on Wednesday, with the Dow Jones down by 0.8% or 270 points and the S&P 500 down by 0.7%. The Nasdaq Composite lost about 0.5%.
Major Economic reports are approaching, and now information about the Fed’s next step: the first claim for unemployment benefits is due on Thursday.
European Stocks Outlook
European stocks fell in early trade, with the Stoxx 600 declining by 0.8%.
Investors are bracing for the European Central Bank’s decision to hike interest rates and trade weak earnings from companies like Volkswagen, Airbus, Shell, and Anheuser-Busch InBev.
The German DAX, and the French CAC 40, lost about 0.8%, while the UK FTSE 100 lost 0.6%.