U.S. stock index futures declined Thursday, a day after the Federal Reserve hiked rates by another 25 basis points. Traders also grappled with returning contagion fears in the regional bank space. Futures tied to the Dow Jones Industrial Average fell 68 points, or 0.2%. S&P 500 futures dropped 0.2%, as Nasdaq-100 futures shed 0.1%. Shares of PacWest tanked by more than 35% in premarket trading. The decline came after news that the California bank has been assessing strategic options, including a possible sale, a person familiar told CNBC. Regional bank shares sold off hard, with Western Alliance tumbling 19.2% and Zions Bancorporation dropping 11.3%. There likely won’t be a respite for the embattled regional banking sector until the Fed cuts interest rates, said Jeffrey Gundlach, CEO of DoubleLine. Since the closure of Silicon Valley Bank in March, First Republic has joined the ranks of failed institutions and was recently taken over by JPMorgan Chase. “Leaving rates this high is going to continue this stress,” Gundlach said on CNBC’s “Closing Bell” Wednesday. “I believe with a very high degree of probability there’s going to be further regional bank failures.” As the Fed pushed through its 10th rate hike in this cycle and the central bank seemed to soften its language on future increases, Chair Jerome Powell said that it may be too soon to cut. “We on the committee have a view that inflation is going to come down not so quickly,” he said in his post-meeting press conference. “It will take some time, and in that world, if that forecast is broadly right, it would not be appropriate to cut rates and we won’t cut rates.” Stocks closed lower Wednesday, with the Dow shedding 270 points, or 0.8%, and the S&P 500 dropping 0.7%. The Nasdaq Composite lost roughly 0.5%. Looming ahead are key economic reports that will inform the Fed’s next steps from here. Initial jobless claims are due Thursday. Friday’s main event will be April’s payrolls report, which economists polled by Dow Jones predict will rise by 180,000. In terms of earnings, investors will be watching Apple, which is slated to post earnings after the market’s close, along with Lyft, DraftKings and Coinbase. Asia-Pacific were mixed after the U.S. Federal Reserve hiked rates by 25 basis points as widely expected, bringing the federal funds rate range to 5%-5.25% — its highest level since August 2007. China’s factory activity fell into contraction for the first time in three months, with the Caixin China purchasing managers’ index reading sliding to 49.5. Stocks in mainland China were mixed after returning from the Labor Day holiday. The Shenzhen Component slid 0.57% to end the session at 11,273.86 and the Shanghai Composite climbed 0.82% to close at 3,350.45. Hong Kong’s Hang Seng index gained 1.29% in its final hour of trade and the Hang Seng Tech index rose 0.54%. In Australia, the S&P/ASX 200 fell marginally to end at 7,193.1, as the country’s trade surplus widened to AU$15.27 billion in March. South Korea’s Kospi closed marginally down at 2,500.94, while the Kosdaq rose 0.22% to 845.06. Japanese markets are closed for a holiday Thursday. Oil prices rose on Thursday but were unable to claw back much of this week’s more than 8% decline as demand concerns in major consuming countries continued to weigh. Brent futures were up 73 cents, or 1.01%, to $73.06 a barrel. U.S. West Texas Intermediate (WTI) crude rose 49 cents, or 0.71%, to $69.09, after falling earlier in the session to $63.64, the lowest since Dec. 2, 2021. Gold took a breather on Thursday after accelerating to a near record high as the U.S. Federal Reserve steered clear of hinting at further rate hikes, with elevated economic risks seen fueling robust demand for the safe-haven metal. Spot gold added 0.2% to $2,043.38 per ounce after earlier climbing to $2,072.19, just shy of a record high of $2,072.49 hit in 2020, with analysts attributing the slight pullback to profit-taking. U.S. gold futures rose 0.7% to $2,051.80.
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