Futures fall as fears about hawkish Fed grow

Wall Street stock index futures fell on Friday on fears that accelerating inflation in the face of a sturdy U.S. economy could prompt the Federal Reserve to err on the side of caution by keeping monetary policy restrictive through the year.

Economic data over the week signaled that while inflation rose in January, a tight job market and resilience in consumer spending could offer more room for the Fed to raise borrowing costs.

Goldman Sachs said it was expecting the Fed to raise rates three more times this year and by a quarter of a percentage point each, while money markets are pricing in a terminal rate of 5.3% by July.

All three main indexes clocked their worst annual losses in 2022 since the 2008 financial crisis, dented by the Fed’s fastest monetary tightening in four decades.

In January, hopes that the central bank might be nearing the end of its rate-hiking cycle sparked a renewed interest in beaten-down growth stocks.

However, halfway into February, the indexes have barely been able to match the optimism seen in January, with the blue-chip Dow eyeing a 1% loss, as markets price in the Fed to stay hawkish year-long.

This report’s information was first seen on REUTERS; to read more, click this link.