Stocks look set for a lower open as the market continues to adjust to a more hawkish Federal Reserve.
futures have fallen 339 points, or 1%, while
futures have declined 0.8%, and
futures were off 0.7%.
The drop came as St. Louis Fed President Jim Bullard acknowledged that the Fed has been surprised about the quick recovery in inflation and that discussion about tapering, or reducing the amount of the Fed’s bond purchases had begun. “[The market] has held up pretty well, but the more comments we get like this, the worse it could get over the coming days,” writes Evercore ISI strategist Dennis DeBusschere. “He seems pretty clear that tighter financial conditions are coming. Stocks have downside risk if this is the last thing we will hear from the Fed into the weekend.”
Those comments came after the Fed didn’t actually do anything at the end of its two-day meeting on Wednesday, but did signal a shift in its thinking. Rates didn’t go up and it didn’t start curtailing its bond purchases. But the so-called dots showed that it now expects two rate hikes in 2023, enough to demonstrate a hawkish lean. That tilt has caused stocks that benefit from a stronger economy and hotter inflation—the financial and material sectors among them—to get hit hard, and has sparked a resurgence in the tech trade. That tilt back toward growthier tech and away from value looks set to continue again on Friday.
It might also make some sense. “The fear of a more hawkish Fed and rates rising sooner we believe has been a 10%+ overhang on tech stocks this year as multiples compressed and we saw a curtailing of risk assets led by tech and EV stocks,” says Wedbush analyst
Dan Ives.
Here are stocks making moves in early trading Friday:
Delta Air Lines (DAL) stock has gained 0.6%, while United Airlines (UAL) has risen 0.7%, and
(AAL) has advanced 0.2% after the European Union said it would allow American travelers. Delta was upgraded to Outperform at Wolfe Research, while United was upgraded to Peer Perform.
(LEN) has gained 2.2% after getting upgraded to Overweight from Neutral at JPMorgan.
(XEC), EQT (EQT), and
(DVN) have fallen 1.3, 1.2%, and 1.6%, respectively, after getting downgraded to Equal Weight from Overweight at Morgan Stanley.
(BIIB) has risen 1.4% after getting upgraded to Overweight from Neutral at Piper Sander.
(ADBE) has gained 3% after reporting a profit of $3.03 a share, beating forecasts for $2.81.
Write to Ben Levisohn at ben.levisohn@barrons.com
