Futures rise on Fed pause hopes

Futures rise on Fed pause hopes

U.S. Stock Futures Inch Higher on Expectations of a Fed Pause

U.S. stock index futures edged higher on Wednesday as investors anticipated that the Federal Reserve could pause its monetary tightening campaign. However, concerns about interest rates staying higher for longer continued to make investors cautious.

The Federal Reserve is expected to maintain its key rate in the range of 5.25%-5.50% as it concludes its meeting. Investors are closely watching economic projections and the comments of Chair Jerome Powell for any indications about the future direction of rates and inflation.

Recent economic data has indicated a decrease in core inflation, leading to speculation that interest rates may have peaked. However, the surge in oil prices has clouded the outlook for headline inflation, which may provide the Fed with room to keep rates higher for a longer period.

Gabriele Foà, a portfolio manager at Algebris Investments, believes that the Fed’s updated projections will likely show one more rate hike in 2023, along with higher growth in 2023/24, but with the aim of stabilizing inflation.

The uncertainty surrounding the trajectory of interest rates and its potential impact on the economy triggered a selloff on Tuesday, amplified by Canada’s inflation rate rising due to higher gasoline prices, as well as weaker-than-expected U.S. housing starts.

• China encourages closer trade relations with Russia despite Western...
• China opposes US discriminatory practices against firms
• China maintains benchmark rates amid stable economy.

Foà further commented, “In the near future, we think economic weakness will take a more central role in the market narrative.”

Financial markets have already priced in a 99% chance of the Fed pausing rates on Wednesday, along with a near 73% likelihood of rates remaining unchanged in November, according to CME’s FedWatch tool.

In addition to the Fed’s decision, investors are eagerly awaiting the debut of marketing automation company Klaviyo on the New York Stock Exchange. Klaviyo had secured a valuation of $9.2 billion in its initial public offering after pricing the shares above their indicated range. This comes in the wake of several successful U.S. listings in recent times.

Ahead of the market opening, Instacart and Arm Holdings experienced mixed fortunes. Instacart lost 4.0% in premarket trading after ending 12% higher in its Nasdaq debut on Tuesday, while Arm Holdings shed 1.7%.

As of 6:57 a.m. ET, Dow e-minis were up 73 points, or 0.21%, S&P 500 e-minis were up 8.5 points, or 0.19%, and Nasdaq 100 e-minis were up 24.5 points, or 0.16%.

J.P. Morgan’s downgrade of Dollar General to “underweight” prompted a 1.9% decline in the discount store operator’s stock. On the other hand, Pinterest enjoyed a 3.9% boost as Citigroup upgraded the image-sharing platform to “buy” from “neutral” and announced a share buyback of up to $1 billion. Coty also saw a 4.5% increase after raising its annual like-for-like sales forecast.

Overall, the U.S. stock market is showing positive signs leading up to the Fed’s announcement, with a slight increase in futures and optimism surrounding upcoming IPOs. While concerns over interest rates persist, investors are hopeful that the Fed’s stance will provide stability and foster economic growth in the coming months.

• .N
• AMERS
• BLR
• CEN
• DRV
• ECO
• INT
• MCE
• MKTREP
• NAMER
• NEWS1
• PLCY
• REP
• STX
• TOPCMB
• TOPNWS
• US