Stock futures in the United States exhibited a slight dip on Wednesday, as Wall Street braced for the latest policy announcement on interest rates from the Federal Reserve. The move follows a challenging month for the financial markets.
Futures linked to the Dow Jones Industrial Average showed a decline of 113 points, equivalent to 0.3%. Meanwhile, S&P 500 futures and Nasdaq 100 futures both saw reductions of about 0.4%.
The pre-market movement in individual stocks was mixed. Yum China Holdings, a restaurant operator, witnessed a 12% drop after failing to meet revenue expectations for the third quarter. Similarly, Match Group, the parent company of Tinder, experienced a 6.2% decline in its shares due to disappointing revenue guidance for the fourth quarter. Advanced Micro Devices (AMD) also saw a 2% fall based on lackluster fourth-quarter revenue guidance.
These market dynamics occurred in the backdrop of the Federal Reserve’s upcoming policy announcement on interest rates. The central bank is widely expected to maintain the current rates without changes. According to the CME FedWatch Tool, fed funds futures pricing suggests a more than 99% probability of rate stability.
The Federal Reserve’s decision is scheduled for release at 2 p.m. ET, followed by a news conference featuring Chair Jerome Powell at 2:30 p.m. ET.
Notably, experts anticipate the Fed to maintain the current interest rates but are keen to glean insights from Chair Powell’s statements regarding the central bank’s future strategies.
Peter Boockvar, the Chief Investment Officer of Bleakley Advisory Group, expressed, “They’re done with respect to the fed funds rate. They’re certainly not done with respect to their balance sheet. That’s the continuous form of tightening that will continue on.” He emphasized that while the statement might seem uneventful, quantitative tightening continues to impact financial conditions behind the scenes.
The U.S. financial markets have recently faced challenges, resulting in a dismal October. The Dow and the S&P 500 concluded the month with losses of 1.4% and 2.2%, respectively, marking their first three-month losing streak since March 2020. The Nasdaq Composite also experienced a decline of 2.8% in October.
Despite November historically being a strong month for markets, investors are monitoring a peak in bond yields. Earlier this month, the benchmark 10-year U.S. Treasury yield surpassed the significant 5% mark for the first time since 2007, causing concerns about the impact of sustained higher interest rates.
The upcoming Fed announcement is expected to clarify the central bank’s stance, offering guidance to investors and market participants on the road ahead.
“While the central bank is expected to keep rates unchanged, investors will tune in to Chair Jerome Powell’s news conference to gather clues on what the central bank could do down the road,” said Josh Emanuel, Chief Investment Strategist at Wilshire. He expects Powell to adopt a measured and cautious approach in his messaging to avoid sounding overly hawkish.
The global financial markets are striving to recover from the challenges faced in October, with hopes pinned on the Federal Reserve’s policy direction for the near future.