US stock index futures were broadly unchanged on the Wednesday ahead of the Federal Reserve’s monetary policy update.
Futures contracts linked to the Dow Jones Industrial Average were only 36 points below. S&P 500 futures were largely unchanged, while Nasdaq 100 futures traded 0.1% lower.
In early pre-trading hours, big tech stocks like Tesla and Nvidia were a little lower, while the stakes in the economic reopening games Royal Caribbean and Boeing were a little higher.
Stocks fell from record levels during Tuesday’s trading session, with the S&P 500 closing 0.2% lower after hitting an all-time high within the day earlier in the day. The Dow lost nearly 100 points and the Nasdaq Composite lost 0.7% on the weakness of Big Tech’s stocks.
The Federal Reserve opened its two-day session on Tuesday. The central bank is not expected to take monetary policy action, but it could signal that it is considering easing its bond buying policy. The Fed will also release new forecasts on Wednesday that could point to a possible first rate hike in 2023. Previously, the Fed officials had not agreed on a rate hike until 2023.
The Fed’s statement and forecast will be released at 2 p.m. ET, followed by a press conference from Chairman Jerome Powell 30 minutes later.
The meeting comes as inflation warms and producer prices rise in May at the highest annual rate in nearly 11 years, a report on Tuesday showed. This has led some, including Paul Tudor Jones, to urge the central bank to rethink its loose monetary policy.
“On an annual basis, inflation is indeed high,” said Brad McMillan, chief investment officer for the Commonwealth Financial Network. “On a two-year basis that captures the downturn and the upturn, inflation has still been normal for the past decade. The annual numbers are just misleading … Inflation is nowhere near as bad as the headlines suggest, “he added. McMillan said he expected the Fed to stay on course and hold the policy simulatively.
The central bank buys $ 120 billion worth of bonds every month as the economy continues to recover from the coronavirus pandemic.
Minutes from the last Fed meeting showed that some Fed officials said it might be appropriate to discuss adjustments to the bond purchase program should the economy continue to recover. Economists predict that while some of these discussions may begin, specific details won’t be revealed until later this year.
“The most important component to be seen at Wednesday’s press conference is an endorsement from the Fed chairman [Jerome] Powell that the tapering discussion is ongoing and officials are considering a timeframe for when they will tell markets that the tapering train is due to leave the station, “noted Danielle DiMartino Booth, CEO and chief strategist, Quill Intelligence Attendees expect a loud and clear rejuvenation signal to arrive at the Jackson Hole meeting in August. “
The Wells Fargo Investment Institute released its mid-2021 outlook on Tuesday, saying it sees an accelerated economic recovery through 2022, thanks in part to continued vaccine rollouts. Inflation, taxes, and interest rates are the company’s top concerns for the next 18 months, but the company doesn’t see them derailing the rally.
“It seems very unlikely to us that they will dampen economic recovery or change our investment preferences for stocks versus fixed income and cyclical stock sectors versus defensive and growth-oriented sectors,” the company said.
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