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S&P 500 futures rise in volatile trading as investors grapple with Fed tightening ahead

U.S. stock futures traded volatilely Thursday morning as investors mulled over an update from the Federal Reserve on its rate hike plan.

Futures tied to the Dow Jones Industrial Average added about 70 points, or 0.2%, in highly volatile trading, after earlier plunging nearly 500 points. S&P 500 futures rose 0.5%. Nasdaq 100 futures added 0.7%.

McDonald’s shares fell 2.3% in premarket trading after the fast-food chain’s fourth-quarter earnings missed Wall Street expectations. The company said higher costs weighed on profits. Intel lost 2.7% and Tesla was marginally lower in early morning trading despite strong earnings reports.

On the upside, Netflix jumped more than 4% on news that Pershing’s Bill Ackman bought 3.1 million shares.

A full slate of economic news is set for release Thursday morning, with fourth-quarter GDP, durable goods orders and weekly jobless claims due at 8:30 a.m. ET. Economists surveyed by Dow Jones expect the economy grew at a 5.5% annualized pace in the final three months of 2021. Jobless claims are expected to total 265,000 and durable goods are forecast to show a decline 0.6% in December.

Thursday morning’s rocky trading comes a day after the Federal Open Market Committee strongly indicated the first interest rate hike since late 2018 could come as soon as March.

Chairman Jerome Powell rattled markets Wednesday saying the Fed has “quite a bit of room” to raise rates before negatively impacting employment.

“Yesterday’s FOMC decision and Powell’s presser was both positive and negative for markets, but in the end, it mostly reinforced what we know: The Fed is serious about raising rates, that’s going to continue to … pressure the market multiple, and it will keep markets volatile,” Tom Essaye, founder of Sevens Report, said in a note.

Stocks fell sharply after the comment, and traders in the fed funds futures market now price in five quarter-percentage-point increases this year. The benchmark 10-year Treasury yield climbed above 1.8% following his remarks.

Still, the Dow ended the day down 129 points, after gaining more than 500 points at one point, following the Fed update. The S&P 500 lost 0.2% and the Nasdaq Composite closed little changed.

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