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Looming Fed Announcement May Lead To Choppy Trading On Wall Street
US Market
The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction following the rebound seen over the course of the previous session.
Traders may be reluctant to make significant moves ahead of the Federal Reserve’s highly anticipated monetary policy announcement this afternoon.
While the Fed is widely expected to leave interest rates unchanged, traders will look to the accompanying statement and economic projections for clues about the outlook for rates.
CME Group’s FedWatch Tool is indicating a 99.0 percent chance the Fed will leave rates unchanged today and a 90.7 percent chance rates will remains unchanged in May.
The outlook for June is more mixed, however, with the FedWatch Tool indicating a 55.0 percent chance of a quarter point rate cut and a 39.7 percent chance of an extended pause.
Nonetheless, the tech sector may receive a boost from a surge by shares of Intel (INTC), with the semiconductor giant jumping by 2.4 percent in pre-market trading.
The advance by Intel comes after the company was awarded up to $8.5 billion in direct funding from the Biden administration for commercial semiconductor projects under the CHIPS and Science Act.
After coming under pressure early in the session, stocks showed a significant turnaround over the course of the trading day on Tuesday. The major averages climbed well off their worst levels of the day and into positive territory.
The major averages reached new highs for the session going into the close of trading. The Dow advanced 320.33 points or 0.8 percent to 39,110.76, the S&P 500 climbed 29.09 points or 0.6 percent to 5,178.51 and the Nasdaq rose 63.34 points or 0.4 percent to 16,166.79.
The turnaround on Wall Street partly reflected a rebound by Nvidia (NVDA), as the AI darling’s performance has recently been a key driver of activity on Wall Street.
After tumbling as much as 3.9 percent early in the session, shares of Nvidia are currently jump by 1.1 percent on the day.
The recovery by Nvidia came after traders digested news out of the chipmaker’s first-ever GTC Conference on Monday, when the company unveiled its latest line of AI chips, called Blackwell.
Meanwhile, traders also continued to look ahead to the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday.
On the U.S. economic front, a report released by the Commerce Department showed a substantial rebound in new residential construction in the U.S. in the month of February.
The Commerce Department said housing starts spiked by 10.7 percent to an annual rate of 1.521 million in February after plunging by 12.3 percent to a revised rate of 1.374 million in January.
Economists had expected housing starts to surge by 7.1 percent to a rate of 1.425 million from the 1.331 million originally reported for the previous month.
The report also said building permits shot up by 1.9 percent to an annual rate of 1.518 million in February after dipping by 0.3 percent to a revised rate of 1.489 million in January.
Building permits, an indicator of future housing demand, were expected to jump by 1.7 percent to a rate of 1.495 million from the 1.470 million originally reported for the previous month.
Oil service stocks moved significantly higher over the course of the session, driving the Philadelphia Oil Service Index up by 2.2 percent to its best intraday level in well over four months.
The rally by oil service stocks came amid an increase by the price of crude oil, with crude for April delivery climbing $0.75 to $83.47 barrel.
The substantial rebound by housing starts also contributed to considerable strength among housing stocks, as reflected by the 1.7 percent gain posted by the Philadelphia Housing Sector Index.
Steel, natural gas and biotechnology stocks also moved notably higher, while gold stocks saw continued weakness amid a modest decrease by the price of the precious metal.
U.S. Economic Reports
The Energy Information Administration is scheduled to release its report on oil inventories in the week ended March 15th at 10:30 am ET.
Crude oil inventories are expected to come in nearly unchanged after falling by 1.5 million barrels in the previous week.
The Federal Reserve is due to announce its monetary policy decision at 2 pm ET, followed by Fed Chair Jerome Powell’s post-meeting press conference at 2:30 pm ET.
Stocks in Focus
Shares of PDD Holdings (PDD) are surging in pre-market trading after the Temu parent reported better than expected fiscal fourth quarter revenues.
Restaurant chain Chipotle Mexican Grill (CMG) is also likely to see initial strength after announcing its board has approved a 50-for-one split of its common stock.
Meanwhile, shares of Signet Jewelers (SIG) may come under pressure after the jewelry retailer reported better than expected fiscal fourth quarter earnings but provided disappointing revenue guidance for the current quarter.
Europe
European stocks are turning in a mixed performance on Wednesday as investors look ahead to the Federal Reserve and Bank of England policy decisions for direction.
In economic news, German producer prices declined for the eighth straight month in February, and at a faster-than-expected pace, data published by Destatis showed earlier today.
Producer prices registered an annual decrease of 4.1 percent after declining 4.4 percent in January. Prices have been falling since July 2023.
The British pound traded weak after data showed U.K. consumer price inflation weakened in February to the lowest since 2021.
The consumer price index registered annual growth of 3.4 percent, slower than the 4.0 percent rise in January. The rate was the lowest since September 2021.
While the German DAX Index is up by 0.2 percent, the U.K.’s FTSE 100 Index is down by 0.2 percent and the French CAC 40 Index is down by 0.7 percent.
British insurance and asset management giant Prudential has declined despite reporting strong growth in new business over 2023.
French lender Credit Agricole and financial service provider Worldline have edged lower after they have formed a joint venture to provide digital payment services for merchants in France.
Biotech company Valneva has plunged after it reported a net loss of 101.4 million euros for fiscal year 2023. Annual total revenues dropped to 153.7 million euros from 361.3 million euros in 2022.
Deutsche Wohnen shares have also plummeted. The German real estate firm, part of the Vonovia Group, reported a decline in fiscal 2023 group funds from operations and posted sharply wider loss on an after-tax basis in a challenging environment.
On the other hand, Braemar has shown a strong move to the upside as the shipbroker retained its 2024 profit and revenue guidance.
Johnson Matthey has also soared. The company has agreed to sell its medical device components business to Montagu Private Equity for $700 million in cash.
Indus Holding has also jumped. The engineering and infrastructure holding company reported that its fiscal 2023 earnings after taxes was 56.1 million euros, compared to previous year’s loss of 41.4 million euros.
Asia
Asian stocks rose broadly on Wednesday as bond yields dipped ahead of the Federal Reserve’s monetary policy announcement later in the day.
The U.S. central bank is widely expected to keep rates steady, but the focus will be about what Fed officials say about lowering rates.
The yen hovered near a four-month low against the dollar and gold held steady, while oil prices slipped after hitting a four-month high in the previous session following Ukrainian attacks on Russian oil infrastructure.
Japanese markets were closed for a public holiday. Chinese shares closed higher as encouraging factory output and retail sales data released earlier this week offset investor worries over the country’s deepening property market crisis.
The benchmark Shanghai Composite Index rose 0.6 percent to 3,079.69, while Hong Kong’s Hang Seng Index edged up marginally to 16,543.07.
The People’s Bank of China held its one-year and five-year loan prime rates steady at 3.45 percent and 3.95 percent, respectively, today after cutting the over-five-year rate by 25 basis points last month.
Seoul stocks led regional gains as Samsung Electronics’ shares spiked after reports that Nvidia is looking to procure high-bandwidth memory chips from the company.
Shares of Samsung Electronics soared 5.6 percent, while the benchmark Kospi settled 1.3 percent higher at 2,690.14. Rival SK Hynix declined 2.3 percent on the prospect of more competition from Samsung.
Australian markets ended on a flat note, giving up early gains. Higher crude prices lifted energy stocks, while banks reversed early gains.
Gold miners underperformed, with Newmont and Northern Star Resources falling around 3 percent each ahead of the Fed decision.
Across the Tasman, New Zealand’s benchmark S&P NZX-50 Index inched up 0.1 percent to 11,832.71.
Commodities
Crude oil futures are tumbling $1.34 to $82.13 a barrel after climbing $0.75 to $83.47 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,157, down $2.70 compared to the previous session’s close of $2.159.70. On Tuesday, gold slipped $4.60.
On the currency front, the U.S. dollar is trading at 151.75 yen compared to the 150.86 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0839 compared to yesterday’s $1.0866.
