(Reuters) – U.S. stock futures gave up slim early gains to trade lower on Thursday, a day after the Federal Reserve’s forecast of fewer interest rate increases in 2019 fell short of investors’ hopes of a more dovish monetary policy.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 19, 2018. REUTERS/Brendan McDermid
The Fed raised interest rates on Wednesday and projected two hikes next year, instead of three, but what spooked the markets was Fed Chairman Jerome Powell saying the central bank would keep its balance sheet reduction on autopilot.
The specter of rising borrowing costs only added to concerns of slowing corporate profit growth next year amid slackening economic growth, with increasing fears of a recession in the backdrop of the China-U.S. trade war and a host of other geopolitical concerns.
U.S. stocks swooned to close about 1.5 percent lower. The Dow Industrials Average .DJI closed at its lowest since November last year and the Dow Transports .DJT closed nearly 21 percent below its record high, confirming bear territory.
“I believe the reaction after the Fed meeting was a bit overdone. The immediate reaction to a surprise is always negative and sell buttons always get hit very quickly,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin.
The S&P 500 .SPX ended 14.5 percent lower than its record closing high on Sept. 20, with 298 components now down 20 percent or more from their 52-week highs.
At 9:05 a.m. ET, Dow e-minis 1YMc1 were down 0.24 percent. S&P 500 e-minis ESc1 fell 0.28 percent and Nasdaq 100 e-minis NQc1 were down 0.35 percent.
Shares of Walgreens Boots Alliance Inc (WBA.O) were down 2.2 percent as the drugstore chain launched a cost-cutting plan after beating estimates.
Conagra Brands Inc (CAG.N) dropped 3.7 percent after the packaged foods maker’s sales missed estimates on delayed shipments and weak demand.
Accenture Plc (ACN.N) fell 2.2 percent as its full-year revenue and profit outlook largely fell below estimates.
Reporting by Medha Singh in Bengaluru; Editing by Shounak Dasgupta