By Shubham Batra and Ankika Biswas
(Reuters) - Wall Street's main stock indexes were set to extend losses on Friday as fears of a looming recession, sparked by the Federal Reserve's relentless battle against inflation, hammered sentiment.
Investors are trying to come to terms with Fed Chair Jerome Powell's recent comments, signaling more policy tightening ahead, and the central bank's projection that interest rates would breach the 5% mark in 2023, a level not seen since 2007.
"The market is reeling from the aftershock of the Federal Reserve's hawkish rhetoric and more specifically because of the Fed's movement of its dot plots to above the 5%," said Andre Bakhos, managing member at Ingenium Analytics LLC.
Money market bets show at least two 25 bps rate hikes next year and a terminal rate of about 4.9% by midyear, before falling to around 4.4% by 2023 end.
The benchmark S&P 500 and the Nasdaq suffered their steepest percentage drop in six weeks, with the Dow Jones Industrial Average falling the most in three months on Thursday.
Market participants have largely ruled out chances of a Santa rally this year, thanks to the clamp down by major hawkish central banks. The Bank of England and the European Central Bank were the latest ones to indicate an extended rate-hike cycle on Thursday.
Investors will monitor the S&P Global (NYSE:SPGI) manufacturing and services PMI for December after the opening bell for more clues on the current state of the economy, and San Francisco Fed President Mary Daly's comments to gauge the pace of future rate hikes at 12 p.m. ET.
Economic data on Thursday showed poor U.S. retail sales in November, even as the labor market remained strong with the number of Americans filing for unemployment benefits falling last week.
The simultaneous expiration of stock options, stock index futures and index options contracts later in the day, known as triple witching, could cause volatility through the trading session.
At 8:42 a.m. ET, Dow e-minis were down 384 points, or 1.16%, S&P 500 e-minis were down 41.25 points, or 1.05%, and Nasdaq 100 e-minis were down 68.5 points, or 0.6%.
Meta Platforms Inc jumped 2.0% in premarket trading after J.P. Morgan upgraded the stock to "overweight" from "neutral".
Adobe (NASDAQ:ADBE) Inc gained 5.1% after the company forecast first-quarter profit above expectations.
Exact Sciences Corp jumped 23.9% after rival Guardant Health Inc's cancer test missed expectations, while Digital World Acquisition Corp dipped 4.9% following the resignation of finance chief Luiz Braganza. (This story has been corrected to fix the name of the firm to Ingenium Analytics from New Vines Capital and the designation to managing member from managing director, in paragraph 4)