US Stock Markets Open Lower as Fed Considers One More Rate Hike

By Investors Hub

The major U.S. index futures are pointing to a lower opening on Thursday, with stocks likely to move to the downside after ending the previous session roughly flat.

Lingering concerns about the outlook for interest rates may weigh on the markets as traders continue to digest the minutes of the Federal Reserve?s latest monetary policy meeting.

The minutes released Wednesday afternoon showed the Fed continues to favor a ?gradual approach? to raising interest rates, with the meeting participants generally judging that the economy was evolving about as anticipated.

The Fed?s forecasts point to one more rate hike before the end of this year, with CME Group?s FedWatch indicating a nearly 80 percent chance of a quarter-point rate increase in December.

After recovering from an early move to the downside, stocks showed a lack of direction over the course of afternoon trading on Wednesday. The major averages spent the afternoon bouncing back and forth across the unchanged line.

The major averages eventually ended the day in negative territory. While the Dow fell 91.74 points or 0.4 percent to 25,706.68, the Nasdaq slipped 2.79 points or less than a tenth of a percent to 7,642.70 and the S&P 500 edged down 0.71 points or less than a tenth of a percent to 2,809.21.

The lackluster performance in the afternoon came after the Federal Reserve released the minutes of its September monetary policy meeting.

The Fed argued the “gradual approach” would balance the risk of raising rates too quickly, causing a slowdown in the economy, and raising rates too slowly, leading to inflation above the central bank’s 2 percent objective.

Looking ahead, the minutes said a few meeting participants expected rates would need to become modestly restrictive for a time.

A number of participants also determined it would be necessary to temporarily raise rates above the longer-run level in order to reduce the risk of a sustained overshooting of the Fed’s inflation target.

Meanwhile, a couple of participants indicated they would not favor adopting a restrictive policy stance in the absence of clear signs of an overheating economy and rising inflation.

During the meeting, the Fed decided to raise rates by a quarter point for a third time this year to 2 to 2.25 percent and forecast another rate hike before the end of the year. The central bank’s forecasts also pointed to three rate hikes in 2019.

The Fed’s assessment that the “gradual approach” to raising rates remains appropriate comes even as President Donald Trump has repeatedly attacked the central bank for hiking rates too quickly.

Trump continued his assault on the Federal Reserve in an interview with Fox Business on Tuesday, calling the central bank the “biggest threat” to his presidency.

Profit taking contributed to the early weakness on Wall Street, as traders cashed in on yesterday’s gains amid lingering uncertainty about the near-term outlook for the markets.

A negative reaction to the latest batch of earnings news also weighed on the markets, with tech giant IBM Corp. (IBM) falling after reporting third quarter earnings that beat analyst estimates but weaker than expected revenues.

On the other hand, shares of Netflix (NFLX) surged higher after the video streaming service reported better than expected third quarter earnings, revenues, and subscriber growth.

Negative sentiment was also generated by the release of a report from the Commerce Department showing a much bigger than expected pullback in housing starts in the month of September.

Despite the recovery attempt by the broader markets, housing stocks ended the day significantly lower. The Philadelphia Housing Sector Index tumbled by 1.9 percent after jumping by 2.4 percent in the previous session.

Housing stocks pulled back after moving higher for three straight sessions, with the disappointing housing starts data weighing on the sector.

Considerable weakness was also visible among energy stocks, which moved lower along with the price of crude oil. Reflecting the weakness in the energy sector, the NYSE Arca Natural Gas Index slumped by 1.6 percent, the Philadelphia Oil Service Index dropped by 1.4 percent and the NYSE Arca Oil Index fell by 1.1 percent.

On the other hand, tobacco stocks showed a substantial move to the upside on the day, driving the NYSE Arca Tobacco Index up by 1.6 percent. The index rebounded after closing lower for five consecutive sessions.