Opening Bell: SNB Rate Hike Flips Sentiment; Futures, Stocks Lower; Oil Slides

 | Jun 16, 2022 08:50AM ET

  • Market narrative takes a U-turn
  • Surprise Swiss rate hike adds to market tensions
  • Treasuries slide
    • h2 Key Events/h2

    The market sell-off resumed on Thursday with futures on the Dow Jones, S&P 500, NASDAQ 100, and Russell 2000 moving back into negative territory, along with European stocks.

    US indices rallied yesterday following the 75 basis point hike in US interest rates by the FOMC. However, a change in sentiment this morning, perhaps spurred to some degree by today's rate hike shocker from the Swiss National Bank, which took markets completely by surprise when it announced a 50 basis point interest rate hike—the first hike of any kind for the SNB in 15 years—exacerbated concerns about future global economic growth. The Bank of England hiked rates 0.25% as expected.

    Bitcoin remains under pressure and continues to trade lower. 

    h2 Global Financial Affairs/h2

    All four US index futures were deep in the red notwithstanding the view expressed yesterday by many that the Fed's 0.75% increase in interest rates—the sharpest uptick since 1994—illustrates that the US central bank believes the economy will not move into recession, even with higher borrowing costs.

    Traders had priced in such a steep increase—with some even betting on a 1% lift—so the markets were calm immediately after the announcement. That may be a result of US Fed Chair Jerome Powell saying such large hikes would not be the bank's standard practice.

    All four major US indices jumped at least 1% yesterday during the Wall Street session. The tech-heavy NASDAQ 100 outperformed with a 2.5% surge—after the decision was published.

    In Europe, the STOXX 600 Index opened lower today. While the pan-European gauge broke a six-day losing streak after rallying on Wednesday, it did so before the Fed interest rate decision. Thus we're not seeing the same fickleness in Europe as we do in US trading.

    Of course, we could allow for the possibility that today's futures have been sold off by foreign traders while US traders are more optimistic, which will manifest in trading when the market opens in New York.