U.S. stock indexes were set to open lower on Thursday as worries of a global economic downturn from aggressive central bank rate hikes and risks of potential contagion from a turmoil in UK markets turned investors risk averse.
The Dow and S&P 500 e-minis fell for the seventh time in eight sessions, while megacap growth names such as Amazon.com Inc, Apple Inc, Microsoft Corp , Meta Platforms Inc and Tesla Inc lost between 1.6% and 2.7% in premarket trading.
The calm brought about by the Bank of England’s decision on Wednesday to buy long-dated government securities to stabilize the turmoil in the markets caused by the government’s new economic plan was short-lived.
Sterling fell and bond prices slid, with the selloff in British assets spilling over to even safe-haven U.S. Treasuries and top-rated German bonds.
In the previous session, the S&P 500 recorded its first gain in seven sessions. The benchmark index has lost about $9.1 trillion in market value this year and was last valued at $31.2 trillion, according to Datastream.
“You need to see the market beginning to stabilize and that’s not going to happen until it gets a sense of whether or not the Fed is done raising interest rates or earning season comes in better than expected,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
The yields on many Treasuries, which are considered virtually risk-free if held to maturity, now dwarf the S&P 500’s dividend yield, which recently stood at about 1.8%, according to Refinitiv Datastream.
Meanwhile, comments from the Federal Reserve’s Cleveland President Loretta Mester echoed other central bank officials through the week, who have vowed more interest rate hikes to tame inflation.
Latest data showed the U.S. labor market remained resilient as the number of Americans filing new claims for unemployment benefits unexpectedly fell last week to 193,000 despite the Fed’s steep interest rate increases and slowing demand.
At 8:37 a.m. ET, Dow e-minis were down 364 points, or 1.22%, S&P 500 e-minis were down 55 points, or 1.47%, and Nasdaq 100 e-minis were down 207.75 points, or 1.8%.
American Airlines fell about 2.2% as carriers canceled almost 2,000 U.S. flights for Thursday after Hurricane Ian hit Florida’s Gulf Coast with catastrophic force in one of most powerful U.S. storms in recent years.
Share of peers United Airlines Holdings, Southwest Airlines and Delta Air Lines fell between 1.6% and 2.0%.
U.S. cruise companies Norwegian Cruise Line Holdings Ltd and Carnival Corp fell 2.1% after they delayed or canceled trips in anticipation of the hurricane.