US markets sank with increasing fears of a June Fed rate hike on Thursday and the S&P 500 reflected the mood, ending the session in the red for 2016 for the first time in over a month.
The New York Fed President William Dudley added his name to the chorus of regional central bankers calling for a rate hike in June or July, rather than market expectations for September, if at all in 2016.
The S&P 500 pared its losses to finish the day 0.4% down at 2,040. Earlier in the day it was as much as 1% lower. But it still left investors with a sinking feeling, as the ticker wiped out its gains for the year.
Oil was not much use as a safety net - the US benchmark West Texas Intermediate ended flat at $48.16.
The smaller stocks had nothing to celebrate either. The S&P Midcap 400 ended down 0.4% at 1,431 and the S&P Smallcap 600 was 0.8% lower at 670 while the broader small-cap Russell 2000 lost 0.7% to 1,094.
US shares were softer at midsession on Thursday after one of the most influential central bankers in the world's biggest economy sided with the case for a mid-year Fed rate hike.
Bill Dudley, President of the New York Federal Reserve said on Thursday that a rate rise in June or July would likely be appropriate and that he was “surprised” by Wall Street’s subdued expectations for when the central bank would next tighten policy.
He cited what he expected to be a stronger second quarter's growth for the US economy as a reason for the hawkish stance.
It came a day after the Fed published monetgary meeting minutes which made the case for a June rate hike. Markets had given a September rate hike a 57% chance - if anything was to happen in 2016.
The broad-based S&P 500 index was down 0.8% at 2,030 while the S&P Midcap 400 was down 0.7% at 1,425 and the S&P Smallcap 600 lost 1.1% to 668.
But data did not bear out justification for an early rate hike. The closely scrutinised index of manufacturing activity from the Federal Reserve Bank of Philadelphia remained in negative territory for the second month in a row in May, confounding market expectations for a rebound following a weak April.
The index weakened to minus 1.8 in May from minus 1.6 a month earlier. Analysts had expected a positive 3 reading. It is the eighth month out of the past nine the index has registered a negative reading.
US stocks are seen heading lower at the open as global markets have been thrown into some chaos with news of a missing EgyptAir flight and as traders mull more earnings and potential Fed moves.
In London, FTSE100 is down over 61 points to 6,104, while the DAX is down almost 47 points. In France, the CAC 40 is down around nine points, at 4,310.
News sources have the French president francois Hollande saying the plane had likely crashed in the Mediterranean sea.
In the USA yesterday, stocks closed flat-to-lower after the Federal Reserve raised the stakes for a June rate hike and oil prices slumped late in the session.
The benchmark Dow Jones shed 3.36 to 17,526, while the broader S&P500 added 0.42 to stand at 2,047.
Meanwhile, the tech heavy Nasdaq index added over 23 points to 4,739.
Today, futures trading has the S&P500 down 1.25, while the Nasdaq index is down 2.75 and the benchmark Dow Jones is down one point.
Among the big pre-market movers is Walmart (NYSE:WMT), which gained over 8% to US$68.41 as it reported a higher-than-expected quarterly profit and revenue, as sales in the US rose and the giant retailer kept a lid on costs.
Same store sales were up one percent in the quarter, which topped estimates of only a half percent rise.