Wall Street points lower after rate hike, ahead of GDP report

A woman wearing a face mask walks past a bank's electronic board showing the Hong Kong stock index in Hong Kong, Thursday, July 28, 2022. Stocks were mostly higher in Asia on Thursday after the Federal Reserve stepped up its campaign against soaring inflation by raising its policy rate by three-quarters of a point.  (AP Photo/Kin Cheung)

A woman wearing a face mask walks past a bank’s electronic board showing the Hong Kong stock index in Hong Kong, Thursday, July 28, 2022. Stocks were mostly higher in Asia on Thursday after the Federal Reserve stepped up its campaign against soaring inflation by raising its policy rate by three-quarters of a point. (AP Photo/Kin Cheung)

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Wall Street pointed to a slightly lower open on Thursday after the Federal Reserve raised interest rates and ahead of what will be the first look at U.S. economic growth in the tough second quarter.

Dow Jones Industrial Average futures fell 0.1% and S&P 500 futures lost 0.2% before the bell. Both indexes rebounded from larger declines earlier.

The three-quarters of a percentage point rate hike announced by the Fed on Wednesday takes the benchmark short-term rate to its highest level since 2018. The aim is to bring soaring inflation under control.

An update on the economy will come later Thursday with second quarter US GDP data.

Analysts expect that after shrinking from January to March, the US economy probably did not fare much better in the spring.

Shares of Spirit Airlines rose nearly 4% pre-market after JetBlue announced it had agreed to buy the low-cost airline for $3.8 billion, which would create the nation’s fifth-largest airline if it was approved by US regulators. Thursday’s deal comes a day after Spirit’s attempted merger with Frontier Airlines failed.

Investors are also awaiting a call between US President Joe Biden and Chinese leader Xi Jinping.

In midday Europe, the German DAX was unchanged, the CAC 40 in Paris was up 0.2% and the British FTSE 100 was down 0.1%.

In Asian trading, Hong Kong’s benchmark Hang Seng slid 0.2% to 20,622.68 after the territory’s Monetary Authority matched the 0.75 percentage point rate hike from the Fed with one of his. The HKMA aligns its policies with US currency movements to keep the Hong Kong dollar at a stable rate against the US dollar.

Elsewhere in Asia, stocks rose, following Wall Street’s gains after the Fed did exactly as expected and its chairman, Jerome Powell, suggested that Fed rate hikes had already succeeded in slowing the economy. and possibly dampening inflationary pressures.

“Although a concrete decision on tariff relief is not expected from the meeting, any indication of willingness to work on it is an added benefit for markets,” IG’s Jun Rong Yeap said in a commentary.

Tokyo’s Nikkei 225 rose 0.4% to 27,815.48, while the Shanghai Composite added 0.2% to 3,282.58. In Seoul, the Kospi advanced 0.8% to 2,435.27.

South Korea’s Samsung Electronics Co., the world’s top producer of smartphones and memory chips, said on Thursday its operating profit rose 12% in the April-June quarter on strong demand for server chips.

Its shares edged up 0.2% on Thursday.

Australia’s S&P/ASX 200 jumped 1% to 6,889.70 after the government announced retail sales rose in June for the sixth consecutive month. Additionally, Treasurer Jim Chalmers told parliament that the government expects inflation to remain unacceptably low for some time and the economy to slow but not fall into recession.

Markets in Thailand have been closed for a holiday.

On Wall Street, investors greeted the widely expected Fed decision with a broad rally on Wednesday.

Powell’s comments were seen by some as a signal that the Fed might not have to hike rates as aggressively in the coming months, sparking a rally in the final hour of regular trading.

The S&P 500 climbed 2.6% and the tech-heavy Nasdaq jumped 4.1%, its biggest gain in more than two years. The Dow Jones Industrial Average rose 1.4%. The small cap Russell 2000 closed up 2.4%.

The indices are now all on pace for a weekly gain, extending Wall Street’s strong rally in July. The S&P 500 is up 6.3% so far this month.

Rate hikes like Wednesday’s, the fourth so far this year, make borrowing more expensive and slow the economy. The hope is that the Fed and other central banks can deftly find the middle ground where the economy slows enough to whip inflation but not enough to cause a recession.

In other trading on Thursday, benchmark U.S. crude oil added $2.16 to $99.42 a barrel in electronic trading on the New York Mercantile Exchange. It gained $2.28 to $97.26 on Wednesday.

Brent crude, the international price standard, gained $2.09 to $103.76 a barrel.

The US dollar cost 135.36 Japanese yen, down from 136.55 yen. The euro fell slightly to $1.0127 from $1.0197.

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