(Reuters) – U.S. stock indexes fell on Thursday as growth stocks outpaced a jump in Treasury yields after the Federal Reserve left interest rates on hold, hinting at another hike this year.
Rate-sensitive stocks including Apple, MetaPlatforms, Alphabet and Nvidia fell between 0.5% and 1.5% in premarket trading as two-year and 10-year Treasury yields hit multi-year highs.
The U.S. central bank on Wednesday delivered a widely-anticipated relaxation and revised up its top economic forecasts, warning that the fight against inflation is far from over, creating a weak session for Wall Street.
The Fed’s revised quarterly forecast showed the key rate could rise once more to 5.50%-5.75% in 2023 and a much tighter estimate through 2024 than previously expected.
But some investors doubt the central bank will stick to its guns even if bets on the Fed’s dovishness ease from March 2022, when policymakers begin a campaign to tighten monetary policy.
Mark Hafele, chief investment officer at UBS Global Wealth Management, said: “While the dot plots suggest risks to interest rates, we remain optimistic that the hiking cycle is likely and that the Fed will not raise rates again.
“A variety of factors could weigh on the economy in the fourth quarter and push the Fed to stay on track, from low growth and low inflation.”
Traders’ bets on the benchmark rate remaining unchanged in November and December stood at 71% and 53%, respectively, according to CME’s FedWatch tool.
Investors monitor economic data, including weekly jobless claims and available home sales data in August, for clues about the direction of interest rates and the state of the economy.
Meanwhile, the weak performance of recent stocks after their initial highs has cast doubt on hopes of a revival in the initial public offering market, as high interest rates and a broader market downturn are likely to continue.
Shares of marketing automation company Clavio closed at $32.76, below their first-day high on Wednesday. Arm Holdings fell 3.4% to $51.12 premarket, with its IPO price nearing $51 per share, and Instacart lost 1.5% on Thursday.
At 5:23 a.m. ET, Dow e-minis were down 88 points, or 0.25%, S&P 500 e-minis were down 18 points, or 0.4%, and Nasdaq 100 e-minis were down 88.75 points, or 0.59%.
FedEx jumped 5% after surprising investors with a big quarterly profit.
Executives at Alphabet-owned Google cut Broadcom by 5.5% to stop the company as a supplier of artificial intelligence chips in 2027 European time.
Meanwhile, Marvell Technology, which said it is working to replace Broadcom with Marvell as a supplier of network chips used in its data centers, rose 3.4 percent.
(Reporting by Ankika Biswas in Bengaluru; Editing by Arun Koyur)