Dow looks set to sink by triple digits after Fed update, as oil extends fall

U.S. stocks on Friday were set to end the week lower, with equity-index futures on track to open lower a day after the Federal Reserve held interest rates steady, as expected, and appeared to affirm expectations for a hike to interest rates in December.

How are benchmarks performing?

Futures for the Dow Jones Industrial Average YMZ8, -0.50% were down 156 points, or 0.6%, at 26,044, and those for the S&P 500 index ESZ8, -0.60%  were off 18.45 points, or 0.7%, at 2,790.25, while Nasdaq-100 futures NQZ8, -0.88% were retreating 58 points, or 0.8%, at 7,108.50.

On Thursday, the Dow DJIA, +0.04% gained 10.92 points to 26,191.22, while the S&P 500 index  SPX, -0.25% shed 7.06 points, or 0.3%, to 2,806.83 and the Nasdaq Composite COMP, -0.53% fell 39.87 points, or 0.5%, to 7,530.88.

For the week, the Dow is poised to register an increase of 3.6%, the S&P 500 was on pace to return 3.1% over the past five sessions, while the Nasdaq was looking at an increase of 2.4% over the same period, as of Thursday’s close.

What’s driving the market?

Chairman Jerome Powell’s Fed held benchmark rates at a range between 2% and 2.25% and said that the central bank “expects further gradual increases in the target range for the federal-funds rate.”

The policy-setting Federal Open Market Committee delivered no surprises to Wall Street investors, however, investors will continue to wrestle with policy makers’ hopes to normalize interest rates after a decade of easy-money policies.

The key factors that have renewed doubts in the minds of investors is an unceasing decline in oil prices, which has raised questions about the health of the global economy, and the health of the world’s second-largest economy, China, remains a persistent source of anxiety on Wall Street.

Recent data indicates that auto sales in China dropped 12% in October to 2.38 million, from a year ago and Chinese policy makers announced new bank lending rules as it attempts to manage concerns about its equity market and an economic slowdown.

U.S. crude-oil prices settled in bear-market territory on Thursday, defined as a drop of at least 20% from a recent peak, and that decline may invite questions about the health of demand and the vitality of economies around the globe. Along with other key commodities, oil has often been used as a gauge of world-wide health.

What are strategists saying?

“Stock markets are lower this morning as fears persist about further interest-rate hikes from the Federal Reserve. The Fed maintained [its] monetary policy, and announced that ‘further gradual increases’ are in the pipeline. This resulted in the S&P 500 finishing lower and a sell-off in Asia,” wrote David Madden, market analyst at CMC Markets.

Which stocks are in focus?

Shares of the Walt Disney Co. DIS, -0.90% were in focus after the entertainment behemoth late Thursday reported fourth-quarter earnings that beat expectations. Profit for the latest quarter rose to $2.32 billion, or $1.55 a share, up from $1.75 billion, or $1.13 a share, in the year-earlier quarter.

Dropbox Inc.’s stock DBX, -1.08%  was active after the cloud-storage company reported more cash from each user and grew its paying-customer base in the third quarter, according to a Thursday earnings report, as the company continued to narrow its losses and grow sales faster than Wall Street’s expectations.

Shares of General Electric GE, -1.09% were sinking in premarket action after JPMorgan Chase downgraded the outlook for the conglomerate’s stock.

What data are ahead?

The producer-price index for October is set to be released at 8:30 a.m. Eastern Time, with estimates for a rise of 0.2%. At 10 a.m., readings of consumer sentiment for November, with a forecast of 98.2, and wholesale inventories for September are due.

How were other markets trading?

China’s Shanghai Composite Index SHCOMP, -1.39%  fell 1.4% on Friday, the small-capitalization Shenzhen Composite Index 399106, -0.43%  ended the session off 0.4%. Meanwhile, Japan’s Nikkei NIK, -1.05% declined 1.1%.

The 10-year Treasury note yield was at 3.21%, holding its Thursday levels, while gold GCZ8, -0.52% continued to extend a recent slide, down 0.4% at 1,219.80 an ounce, and those for U.S. benchmark oil CLZ8, -1.24%  was down 1.6% at $59.68 a barrel, sinking below a psychological level at $60, while the dollar, measured by the ICE U.S. Dollar Index DXY, +0.17% held steady.

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