Dow futures sink over 300 points, as investors dial back hopes for the Fed to switch course on rate hikes

• Dow futures sank over 300 points Friday as US stocks looked set for another day of steep losses.
• Investors are waking up to the reality the Fed will push borrowing costs above 5%, analysts said.
• A bigger-than-expected drop in retail sales underlined that a recession is set to hit the US.

US stock futures slid on Friday as hopes waned that the Federal Reserve would soon change course on its aggressive interest rate hikes.

Futures on the Dow Jones were down 0.9%, or 310 points lower, at 7:10 a.m. ET, recovering somewhat from deeper losses earlier in the morning. Meanwhile, S&P 500 futures shed almost 1% and Nasdaq 100 futures were 0.6% lower. That indicates the major US stock indexes are set for another day of declines, after they fell sharply Thursday.

Investors appear to be waking up to the reality that the Fed will keep hiking rates well into 2023 and that those increases will push borrowing costs up to above 5% next year, analysts said.

"The hawkish message from the Fed and the ECB leaves risk sentiment under a cloud going into year end, with talk of a renewed Russian offensive in Ukraine, and the rapid surge in COVID cases in China also casting a long shadow," said Marc Ostwald, chief economist at ADM Investor Services, in a note Friday.

At the same time, a bigger-than-expected drop in retail sales underlined that a recession will hit the US economy next year. It was the biggest fall in 11 months, reflecting waning demand for goods as inflation and recession fears bite American consumers' wallets.

Elsewhere in markets:

• The US dollar index, a gauge of the currency's strength against major rivals, fell slightly to 104.47.
• Oil prices declined, with Brent crude futures, the international benchmark, down 1.8% at $79.73 a barrel. West Texas Intermediate futures shed 1.9% to reach $74.66 a barrel.