(Bloomberg) -- U.S. stock index futures erased sharp declines and moved higher as dip buyers returned and investors weighed the fallout from a hawkish Federal Reserve against the strength of an economic recovery.
March futures tracking the Nasdaq 100 rose 0.5% at 5:18 a.m. in New York, having earlier declined as much as 2.2%, while contracts on the S&P 500 rose 0.2%. The Stoxx 600 Europe was little changed as weakness in technology and retail stocks offset a rise in banking shares.
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Global stock indexes have swung wildly this week as investors fretted over the risks from a combination of tighter monetary policy and slower economic growth. In a press conference Wednesday, Federal Reserve Chair Jerome Powell said the inflation situation is “slightly worse” than it was at the central bank's December meeting and signaled the first rate hike since 2018 will happen “soon.”
“The Fed is signaling it will hike rates very quickly and this is unsettling for equity investors,” said Alexandre Baradez, chief market analyst at IG France. “But let's not forget that this means the economy is faring better and that we are heading toward a normalization. This is good news and the recent declines create buying opportunities. I see no equities crash coming.”
Expensive technology stocks have been hit particularly hard by concerns of higher interest rates since they mean a bigger discount for the present value of future profits, hurting growth stocks with the highest valuations and boosting cheap or so-called value shares. The technology-heavy Nasdaq 100 is down 13% year-to-date, on track for its worst month since October 2008.
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A slew of corporate earnings reports failed to assuage concerns around slowing growth. Tesla Inc fell in premarket trading as strong quarterly results were overshadowed by cautious comments on supply chain troubles. In Europe, appliance maker Electrolux AB tumbled as much as 3.2% after U.S. peer Whirlpool Corp. reported lower-than-expected fourth-quarter sales.
“We are currently seeing a kind of buyers strike' in the market with players who are no longer so easily available,” said Marcus Poppe, portfolio manager at DWS. “Retail investors have lost money in real terms and might not have liquidity to buy again. Hedge funds have also had a difficult start to the year and lack the buffer to take more risk.”
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