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Dow futures fall slightly as investors assess the prospect of higher interest rates

Traders on the floor of the NYSE

Source: NYSE

Futures tied to the Dow Jones Industrial Average ticked lower Thursday night as investors continued evaluating earnings reports and tougher language from Federal Reserve speakers.

Futures connected to the 30-stock index inched down 54 points, or 0.2%. The S&P 500’s futures traded near flat, while Nasdaq-100 futures jumped 0.1%.

Thursday brought another day of drops for the major indexes. The S&P 500 shed 0.31%, and the Nasdaq Composite lost 0.35%. The Dow Jones Industrial Average inched downward by 0.02%.

Cisco shares rose during regular trading, jumping off of earnings results. Meanwhile companies posting results after the closing bell such as Gap, Ross Stores and Palo Alto Networks added to the mix of companies outperforming expectations.

But investors also had to consider comments from more than half a dozen Fed speakers at events across the country. Notably, St. Louis Federal Reserve President James Bullard said Thursday that “the policy rate is not yet in a zone that may be considered sufficiently restrictive.” He suggested that the appropriate zone for the federal funds rate could be in the 5% to 7% range, which is higher than what the market is pricing.

Yields, meanwhile, jumped in tandem, with the policy-sensitive 2-year Treasury yield rising to 4.45%. That move alarmed investors who are worried that rising rates could trigger a recession.

Investors have responded to each new piece of economic data or any language in recent weeks that could indicate what the Fed will do next with interest rates, said Shelby McFaddin, investment analyst at Motley Fool Asset Management. In this case, she said the comments on inflation led investors to believe the Fed does not think the economy has cooled enough.

“There’s absolutely been a thirst for relief and a tug of war,” she said of investor response over recent days. “But at the end of the day, it really just depends on this inflationary period becoming deflationary slower than it ramped up, and on what the Fed decides to do next.”

Investors will watch Friday for data on existing home sales for any indication of a cooling economy. Boston Fed President Susan Collins will speak in the morning.

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