(For a live blog on the U.S. stock market, click or type LIVE/ in an Eikon news window.)
* Futures up: Dow 0.25 pct, S&P 0.28 pct, Nasdaq 0.40 pct
By Medha Singh
Dec 20 (Reuters) - U.S. stock futures edged higher on Thursday, following a sharp pullback in the prior session after the Federal Reserve stuck to its plan to keep withdrawing monetary support from an economy it views as strong, dampening hopes for a more dovish outlook.
The Fed raised interest rates on Wednesday and projected two hikes next year, instead of three, but what spooked the markets was Fed Chairman Jerome Powell saying the central bank would keep its balance sheet reduction on autopilot.
The specter of rising borrowing costs only added to concerns of slowing corporate profit growth next year amid slackening economic growth, with growing fears of a recession in the backdrop of the China-U.S. trade war and a host of other geopolitical concerns.
“Investors were expecting a more dovish tone from Powell given the sharp fall in equity markets and challenging global macroeconomic conditions. All they got was a less hawkish tone,” said Hussein Sayed, chief market strategist at FXTM.
U.S. stocks swooned on the news, with the Dow Jones Industrial Average closing at its lowest since November last year and the Dow Jones Transport closing nearly 21 percent below its record high, confirming bear territory.
The benchmark S&P 500 index was 14.5 percent lower from its record closing high on Sept. 20, with 298 components now down 20 percent or more from their 52-week highs.
While futures ticked higher on Thursday, it remains to be seen if the gains will hold. In what has been a turbulent month for U.S. stocks, the market has more often than not failed to build on an uptick in early trading.
At 7:09 a.m. ET, Dow e-minis were up 59 points, or 0.25 percent. S&P 500 e-minis were up 7 points, or 0.28 percent and Nasdaq 100 e-minis were up 25.5 points, or 0.4 percent.
The rate hike along with worries about an oversupply sent oil prices down more than 3 percent. Oil major Exxon Mobil Corp fell 0.2 percent.
Altria Group Inc slipped 0.3 percent after the tobacco giant said it would pay $12.8 billion for a 35 percent stake in e-cigarette startup Juul Labs Inc.
On the economic front, initial claims for state unemployment benefits for the week ended Dec. 15 are expected to rise to 216,000 from 206,000 in the week before. The data is due to 8:30 a.m. ET. (Reporting by Medha Singh in Bengaluru; Editing by Shounak Dasgupta)