Dow Futures Fall as Wall Street Parses Mixed Signals on Pace of Rate Hikes

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Stock futures pointed to a lower start for Wall Street Friday as investors contended with mixed signals from the Federal Reserve on the pace of future interest-rate hikes and signs of a resilient U.S. economy.

Contracts linked to the

Dow Jones Industrial Average
fell 183 points, or 0.5%, to 33,798,

S&P 500
futures were down 0.7% and

Nasdaq
futures declined 0.9%. 

Stocks closed with modest gains Thursday after U.S. jobless claims unexpectedly fell during the week ended Aug. 13, the first decline since late July, suggesting the labor market remains strong. The Philadelphia Federal Reserve’s monthly manufacturing index also surprisingly accelerated in August.

The gains Thursday followed the release on Wednesday of the minutes from the Federal Reserve’s July 26-27 meeting, at which Fed officials agreed they need to keep raising interest rates to cool inflation, but indicated the pace of those hikes could slow if economic data supported such a move.

St. Louis Fed President James Bullard on Thursday said he favored a three-quarters point hike at the Fed’s next meeting in September. The Fed has boosted rates at that pace the last two times it has met. Bullard told The Wall Street Journal in an interview that the central bank “should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation.”

Kansas City Fed President Esther George, however, said the “case for continuing to raise rates remains strong,” but added that the “question of how fast that has to happen is something my colleagues and I will continue to debate, but I think the direction is pretty clear.”

George told a Kansas City economic group that the Fed has “done a lot, and I think we have to be very mindful that our policy decisions often operate on a lag. We have to watch carefully how that’s coming through.”

Both Bullard and George are voting members of the Federal Open Market Committee, the central bank’s rates-setting committee.

The comments from both Fed officials come before the Fed’s annual Jackson Hole conference in Wyoming next week at which Fed Chairman Jerome Powell will be speaking. His comments will be closely monitored by Wall Street.

“After a weeks-long rally, the market is looking for its next catalyst, especially as earnings season winds down and there is still about one month remaining until the next Fed meeting,” said William Huston, chief investment officer at Bay Street Capital Holdings in Palo Alto, Calif.

“Investor focus will now shift to the upcoming Jackson Hole meeting, where central bankers will have another opportunity to address how it plans to adjust monetary policy over the coming months.”

These stocks are on the move Friday:

Bed Bath & Beyond

(ticker: BBBY) declined more than 42% after RC Ventures, the firm run by activist investor Ryan Cohen, sold its entire stake in the home-goods retailer.

Applied Materials

(AMAT) was down 0.4% even after the semiconductor-equipment maker said it expects fiscal-fourth quarter revenue of about $6.65 billion, higher than Wall Street estimates.

Madison Square Garden Entertainment

(MSGE) said it was exploringa spinoff of its traditional live entertainment and the MSG Networks businesses.

Bill.com

(BILL) was rising more than 20% after the cloud software company posted fiscal fourth-quarter results that beat analysts’ forecasts and issued first-quarter revenue guidance also above estimates.

Write to Joe Woelfel at [email protected]