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Market Snapshot: U.S. stock futures struggle for direction ahead of Fed decision

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Stock-index futures hovered near unchanged Wednesday as investors awaited the outcome of an eagerly anticipated Federal Reserve meeting which may provide clues to the long-term path of monetary policy.

What are major benchmarks doing?
  • Futures on the Dow Jones Industrial Average
    YM00,
    +0.00%

    were up 3 points near 32,727.
  • S&P 500 futures
    ES00,
    -0.22%

    were off 8 points, 0.2%, at 3,944.50.
  • Nasdaq-100 futures
    NQ00,
    -0.69%

    declined 83 points, or 0.6%, to 13,058.

Stocks ended mostly lower Tuesday, with the Dow
DJIA,
-0.39%

falling 127.51 points, or 0.4%, and the S&P 500
SPX,
-0.16%

edging down 0.2% after closing at records in the previous session. The Nasdaq Composite
COMP,
+0.09%

held on to a gain of 0.1%.

What’s driving the market?

The Fed isn’t expected to make any tweaks to interest rates or asset purchases, but investors are eager to see the central bank’s latest projections on the economic outlook and the forecast long-term path of interest rates in the so-called “dot plot”. Expectations for a surge in economic growth as vaccine rollouts finally quell the pandemic and another $1.9 trillion round of COVID aid boosts spending have lifted inflation expectations.

Since the Fed last released forecasts in December, the yield on 10-year U.S. Treasury notes has risen by about 0.7 percentage points as investors have priced in higher interest rates and inflation. That in turn has contributed to a rotation away from previously highflying growth stocks toward more cyclically sensitive stocks.

Federal Reserve Chairman Jerome Powell “is in a difficult spot, as he doesn’t want to hike rates anytime soon but at the same time, he can’t ignore the rise in yields and the increasing chatter that higher inflation is in the pipeline,” said David Madden, market analyst at CMC Markets, in a note.

“Mr. Powell will probably make it clear that the Fed won’t be pushed around by the bond market and that it will stay the course with respect to its policy as its economic aims are far from being achieved,” he said.

See: What would cause the Fed to take a U-turn? Hint: a lot more than some high inflation readings

The Fed will release its policy statement at 2 p.m. Eastern, with Powell’s news conference to follow at 2:30 p.m.

Read:Fed to stay dovish this week as Powell channels his inner Gary Cooper calm

Other analysts agreed that the Fed was unlikely to change its tune.

“While the Powell Fed has become more forthcoming, that means that anything it does say will be acted on. So, unless the Fed wants markets to react, it has to revert to obscurity — which is what I expect,” said Brad McMillan, chief investment officer at Commonwealth Financial Network.

Besides, the Fed has consistently signaled it plans to keep current policy in place for some time, until the economy shows clear signs of above-trend growth and inflation, he said, in a note. “Of its two mandates, employment and inflation, the Fed is choosing to focus on employment (which is still well underwater) and not on inflation (which is not a problem),” McMillan wrote in a note.

Also see: Investors say regulatory relief for bank capital rules could ease pressure on bond market

February data on housing starts and building permits is due at 8:30 a.m. Economists look for starts to fall to a seasonally adjusted 1.75 million annualized rate from 1,886 million in January. Permits are seen falling to a 1.54 million pace from 1.58 million.

Which companies are in focus?
  • Uber Technologies Inc.
    UBER,
    -2.23%

    late Tuesday said it would classify tens of thousands of drivers in the United Kingdom as “workers” starting Wednesday, meaning they are still not considered employees but will be entitled to a minimum wage, holiday pay and possibly pensions. The move comes after a court ruling. Shares were down 1.4% in premarket trade.
  • Coherent Inc.
    COHR,
    +0.54%

    shares jumped in premarket trading Wednesday, after Lumentum Holdings Inc.
    LITE,
    -0.23%

     said it had raised its buyout bid for the laser technology company, in response to a bid from II-VI Inc.
    IIVI,
    +0.98%

     that Coherent had determined was “superior” to the previous agreed-on deal with Lumentum.
  • Micron Technology Inc.
    MU,
    +2.90%

    announced Tuesday afternoon that it would drop development of a next-generation memory product it had once developed in concert with Intel Corp. Micron shares were up 0.5% in premarket trade.
  • Alcoa Corp.
    AA,
    -4.90%

    shares were higher in premarket action after the company scored a buy rating from Deutsche Bank and a price target increase, to $36 from $22.
What are other assets doing?
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    1.665%

     spiked 3.5 basis point to 1.652%.
  • The ICE U.S. Dollar Index
    DXY,
    +0.10%

     a measure of the U.S. currency against a basket of six major rivals, was little changed near 91.82.
  • Oil futures were lower, with the U.S. crude benchmark contract
    CL.1,
    -0.94%

     losing 60 cents, or 0.90%, to trade near $64.20 a barrel.
  • Gold futures  added $2.10, or 0.1%, to trade at about $1,733 an ounce on Comex, near a two-week high.
  • In Europe, the Stoxx 600
    SXXP,
    -0.38%

    rose 0.3% and London’s FTSE 100
    UKX,
    -0.43%

     fell 0.3%.
  • Asian equity markets were mostly lower, with the Shanghai Composite
    SHCOMP,
    -0.03%

    fractionally lower, while Hong Kong’s Hang Seng Index
    HSI,
    +0.02%

     a few points higher and Japan’s Nikkei 225
    NIK,
    -0.02%

     little changed near 29,915.

The Moneyist: My mother is recovering from alcoholism. My ‘narcissistic’ sisters took over her finances and they’re draining her bank account. What can I do?

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