U.S. stock futures drop as investors eye Fed rate path

By Scott Kanowsky

Investing.com -- U.S. stock futures slipped on Friday, as traders eyed the potential for further Federal Reserve interest rate hikes following a string of recent economic data points out of the world's largest economy.

At 06:58 ET (11:58 GMT), the Dow futures contract dipped by 175 points or 0.52%, S&P 500 futures traded 29 points or 0.72% lower, and tech-heavy Nasdaq 100 futures moved down by 114 points or 0.92%.

The main indices closed sharply lower on Thursday, with the blue-chip Dow Jones Industrial Average dropping over 400 points, or 1.3%, after two Fed officials suggested that strong data this week could lead to the U.S. central bank increasing the pace of its interest rate hikes to combat inflation.

Elevated annual inflation slowed only slightly in January, and indeed picked up on a monthly basis, while U.S. retail spending also surged to its biggest month-on-month increase in two years.

Federal Reserve Bank of Cleveland President Loretta Mester said she had seen a “compelling economic case” for rolling out another 50 basis-point hike, and St. Louis President James Bullard claimed he would not rule out supporting such an uptick in March, rather than the quarter-point increase seen earlier this month.

However, Bullard noted that the readings had not altered his broader outlook, saying he had expected inflation would take longer to cool down than many investors had anticipated.

In corporate news, Deere (NYSE:DE) and AutoNation (NYSE:AN) are due to report their latest results, as a stream of U.S. earnings begins to ebb.

Elsewhere, oil prices fell, putting them on course for a weekly loss, due to concerns that rising interest rates will cause the U.S. economy - the largest consumer of crude in the world - to dip into recession.

The U.S. dollar soared to a six-week high as well, making oil, which is denominated in dollars, more expensive for foreign buyers.

The crude market has been volatile of late as traders digest the competing impulses of worries of an economic slowdown in the United States and hopes for a pick-up in demand in top oil importer China.

By 06:58 ET, U.S. crude futures fell 3.03% to $76.11 a barrel, while the Brent contract dropped 2.87% to $82.70. Both benchmarks were headed for a weekly decline of more than 2%.

Additionally, gold futures were 1% lower at $1,833.35/oz, while EUR/USD inched down 0.4% to 1.0625.