U.S. stock futures slip, suggesting relief rally already out of steam

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US stock futures slipped Thursday, as a relief rally fueled by Federal Reserve Jerome Powell’s comments quickly ran out of steam.

What’s happening
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On Wednesday, the Dow Jones Industrial Average DJIA,
+2.81%
rose 932 points, or 2.81%, to 34061, the S&P 500 SPX,
+2.99%
increased 125 points, or 2.99%, to 4300, and the Nasdaq Composite Comp,
+3.19%
gained 401 points, or 3.19%, to 12965. The S&P 500’s gain was the largest one-day advance since May 18, 2020.

What’s driving markets
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Powell on Wednesday said the central bank was not likely to hike by 75 basis points at its next meeting, a comment that immediately sent stocks higher and the dollar DXY,
+0.21%
and Treasury yields TMUBMUSD10Y,
2.959%
lower.

But Powell was hardly dovish, all but promising consecutive half-point 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.

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“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 Jukes.

The economics calendar turns to weekly jobless claims ahead of Friday’s nonfarm payrolls report. A wave of corporate earnings is due from companies including Shopify SHOP,
+4.36%,
Kellogg K,
+1.31%,
and after the close, Zillow Z,
+0.66%
and Shake Shack SHAK,
+2.18%,

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Credit: www.marketwatch.com /

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