U.S. stock futures rise as market awaits what could be the biggest Fed rate hike since 2000

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U.S. stock index futures moved higher on Wednesday, ahead of the outcome of a two-day Federal Open Market Committee meeting that is expected to deliver the first 50 basis-point interest rate hike since 2000.

Futures were moving higher alongside oil prices which were up on news that the EU has proposed a ban on Russian oil.

How are stock-index futures trading?
  • Dow Jones Industrial Average futures YM00, +0.20% rose 114 points, or 0.4%, to 33,151
  • S&P 500 futures ES00, +0.22% rose 0.4% to 4,184
  • Nasdaq-100 futures NQ00, +0.16% rose 0.3% to 13,121

On Tuesday, the Dow industrials DJIA, +0.20% rose 67.29 points, or 0.2%, to close at 33,128.79, the S&P 500  SPX, +0.48% gained 0.5% to finish at 4,175.48. The Nasdaq Composite  COMP, +0.22% added 0.2% to end at 12,563.76.

Read: ‘Bubble stocks popped’ but it’s still not safe to buy them, says Ray Dalio, founder of world’s biggest hedge fund

What’s driving markets?

Alongside a half percentage point interest rate hike, the Federal Reserve is expected to announce the start of “quantitative tightening” when the central bank’s decision is announced at 2 p.m. Eastern Time. Investors will also focus on a news conference with Fed Chairman Jerome Powell at 2:30 p.m. Eastern Time.

Read: Fed on track for biggest rate hike since 2000

Clarity from the Fed on size and scope of future rate increases could give beleaguered stocks a lift, say some analysts.

“With financial conditions tightening ahead of the Fed’s interest rate decision, the Fed could be more dovish,” said the Saxo Bank strategy team, in a note to clients. “Since the Fed’s last meeting, the 10-year yield topped 3% for the first time since 2018, the U.S. dollar rallied 5%, the S&P 500 has fallen 8.74%, and hedge fund exposures fell to a 1.5-year low,”

A slightly more dovish Fed could lead to a short-term rally for hard-hit technology and cyclical stocks, they said. “Keep in mind though, the longer-term picture is still very bearish, medium and longer-term, as the Fed is taking out $1 trillion a year out of the system and the economy is expected to slow,” said Saxo strategists.

The yield on the 10-year Treasury note TMUBMUSD10Y, 2.970% was little changed at 2.969%, while that of the 2-year TMUBMUSD02Y, 2.821% was up 3.3 basis points to 2.801%.

In U.S. economic data, private payrolls rose by 247,000 in April, according to the ADP National Employment Report released Wednesday. Economists polled by The Wall Street Journal had forecast a gain of 390,000 private sector jobs.

 “In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said Nela Richardson, chief economist at ADP. 

Meanwhile, U.S. trade deficit jumped 22.3% to record $109.8 billion in March, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis said Wednesday. U.S. imports climbed 10.3% to $351.5 billion, while U.S. exports increased 5.6% to $241.7 billion in March.

Investors are also waiting for the Institute for Supply Management’s April services index to be released at 10 a.m. Eastern.

Oil was also in focus, with prices for both Brent BRN00, +3.80% BRNN22, +3.80% and West Texas Intermediate crude CL00, +3.98% CL.1, +3.98% CLM22, +3.98% up over 3.5% each after the European Union proposed banning Russian oil imports under a phased six-month plan, and refined products within a year.

The move would be part of a sixth batch of EU sanctions against Russia over its invasion in Ukraine that began in late February.

Investors will get a fresh batch of corporate earnings on Wednesday also, with Moderna Inc. MRNA, +3.14% and Yum Brands Inc. YUM, -0.60% among those reporting ahead of the open. After the close, results are expected from eBay Inc. EBAY, +0.58% and Etsy Inc. ETSY, +3.56%, among others.

Which companies are in focus?
How did other assets fare?
  • The ICE U.S. Dollar Index  DXY, -0.25%,  a measure of the currency against a basket of six major rivals, was down 0.2%.
  • Gold futures  GC00, -0.15% slipped, with gold for June delivery  GCM22, -0.15% eased to to $1,867 an ounce.
  • Bitcoin  BTCUSD, +3.56% was up 1.2% at $38,944
  • In European equities, the Stoxx Europe 600  SXXP, -0.53% fell 0.4%. London’s FTSE 100  UKX, -0.50%  dropped 0.4%.
  • In Asia, the Hang Seng Index  HSI, -1.10% fell 1.1% in Hong Kong, while many other Asian markets remained closed for a holiday.