Stock futures rose slightly in overnight trading as investors braced for the Federal Reserve’s key interest rate decision on Wednesday, where the central bank is expected to raise rates by half a -percentage point.
Dow Jones Industrial Average futures were flat. S&P 500 futures rose 0.17% and Nasdaq 100 futures rose 0.3%.
Markets are bracing for a hawkish Fed, and the central bank is also expected to announce a plan to trim its balance sheet by about $9 trillion from $95 billion a month, starting in June.
Respondents to CNBC’s May Fed survey said they expect the central bank to announce the long-awaited 50 basis point hike on Wednesday, followed by a second in June as it seeks to reduce its balance sheet. The majority of respondents also expect a recession at the end of the tightening cycle, according to the survey.
“We are currently at a place where market pricing in this inflation is going to return to near pre-pandemic levels within two years with only modest tightening from the Fed,” said Rebecca Patterson, chief investment strategist. of Bridgewater, on CNBC’s “Closing Bell.” Tuesday. “We think either the Fed is going to have to tighten more than expected to bring inflation back to its target, or inflation is going to be higher than expected.
Meanwhile, Lyft fell 25% in extended trading on Tuesday after the ride-hailing company shared a weak guidance for the current quarter as it plans to invest in driver supply. Airbnb rose 3.6% as the company expects a continued rebound in travel, and Starbucks added 2.4% after beating revenue estimates.
In Tuesday’s regular trading session, the Dow Jones Industrial Average gained 0.20% and the S&P 500 gained 0.48%. The tech-heavy Nasdaq Composite rose 0.22%.
The moves came as markets tried to recover from a sharp tech-led April selloff that saw the Nasdaq hit its worst month since 2008. The Dow Jones and S&P 500 also ended their worst month since March 2020.
“If our call ‘no recession anytime soon’ is correct, then the trend we’ve seen so far this year will likely continue: stocks will fall and then recover at least partially until the recession materializes, and Commodity rates and curves continue to rise over time,” Goldman Sachs chief economist Jan Hatzius wrote on Tuesday.
The S&P 500 is currently trading in correction territory, down about 12.4% year-to-date. Ryan Detrick of LPL Financial pointed out on Tuesday that the current correction matches the size and duration of previous post-WWII corrections.
Along with the Fed’s decision, investors expect earnings from CVS Health, Uber and Yum Brands on Wednesday.
Stock futures rise slightly ahead of key Fed rate decision
Source link Stock futures rise slightly ahead of key Fed rate decision