December 4, 2022

US stock index futures fell sharply early Friday, while the US dollar climbed further against other major currencies as markets continued to hike Federal Reserve interest rates further.

What is happening

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Dow Jones Industrial Average DJIA on Thursday,
S&P 500 SPX, down 107 points or 0.35% at 30077
fell 32 points, or 0.84%, to 3758, and the Nasdaq Composite comp,
fell 153 points or 1.37% to 11067.

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Down for three straight sessions, the S&P 500 closed at its lowest price since June 17.

what is driving the market

The Federal Reserve’s decision on Wednesday to raise its benchmark interest rate three-quarters of a percent for the third time in a row, and aggressive dot plot forecasts of future growth, weighed on US stocks again on Friday. Global stock markets have also suffered as other central banks have followed suit.

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Steve Englander, head of global G10 currency research at Standard Chartered, expected the labor market to show signs of slowing for now. The bank now forecasts a 75 basis point increase from the Fed in November and a 50 basis point increase in December.

“Since activity has not yet responded much to the tightening, the Fed does not have a particularly good estimate of how higher rates are needed to achieve the desired inflation results. Once unemployment begins to rise, Such estimates will become more viable, but till then it is difficult to predict how much higher rates are required,” he said.

Dollar DXY,
continued to strengthen against major rivals. Strategists at UBS Global Wealth Management said it is too early to bottom-fish on the euro, and lowered their forecast for the pound, adding that the intervention was unlikely to stop an uptrend in the dollar versus the yen.

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The pound fell to its worst level in 37 years as traders bailed on the UK currency after Britain unveiled a tax cut funded by bond sales.

On the economic data front, a flash reading of the S&P Global US Purchasing Managers’ Indices for September for both the manufacturing and services sectors is due for release at 9:45 a.m. Eastern. A “Fed License” event will also be accompanied by a welcome address by Chair Jerome Powell.