Stock futures rose Wednesday morning as investors anxiously awaited the arrival of the Federal Reserve’s latest monetary policy decision after a volatile start to the week.
Contracts on the Dow jumped ahead of the event, adding more than 150 points, or 0.5%, with about two hours until the opening bell. Both the S&P 500 and Nasdaq also headed toward higher opens.
Meanwhile, FedEx (FDX) shares slid after the shipping giant posted weaker-than-expected quarterly earnings, with supply chain disruptions and labor scarcities weighing on results. Shares of Dow component Disney (DIS), meanwhile, recovered Tuesday’s losses after CEO Bob Chapek issued a weaker-than-expected outlook for streaming subscribers and said he expected production delays to impact current-quarter results during a Goldman Sachs conference.
For markets, the Fed’s latest decision will be one of this week’s banner events, redirecting attention toward domestic monetary policy after fears over fallout from the potential default of Chinese property giant China Evergrande set off stocks’ worst day since May on Monday.
The monetary policy statement and subsequent press conference from Fed Chair Jerome Powell Wednesday afternoon are expected to lay the groundwork for a near-term announcement and start to tapering of the Fed’s crisis-era asset purchase program, which currently comprises purchases of $120 billion per month in agency mortgage-backed securities and U.S. Treasuries.
The anticipation of tapering has been a source of consternation for market participants over the last several months as the central bank escalated its discussions around beginning to remove one of the key sources of support to the pandemic-stricken economy.
“I think on balance the Fed is still marching forward. They’re going to tell us that they’re about to taper this year, or their plan is still to taper this year. That sets up November or maybe December as a formal announcement,” Julia Coronado, MacroPolicy Perspectives president, told Yahoo Finance on Tuesday. “So this meeting is really not about doing anything, it’s just about reminding us that the economy is making progress, the recovery is under way and the Fed is beginning a very gradual process of normalizing, as they like to say, monetary policy.”
The policy decision will also come alongside an updated economic projections from Federal Open Market Committee (FOMC) members, including a first look at their expectations for 2024. Based on the central bank’s latest projections from June, the FOMC’s “dot plot,” or chart of interest rate expectations, suggested the median member expected two rate hikes by the end of 2023. However, given the improvements in the economic recovery seen since then, some pundits expect to see more FOMC members pull forward their expected timeline to next year hike interest rates from their current near-zero levels.
“[Wednesday’s] dot plot will likely show more dots for a rate hike in 2022, but it’s not clear that progress since the June meeting has been enough to push three more FOMC members — making a majority — into expecting action next year,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note.
“Moreover, the Delta wave had barely begun at the time of the June FOMC meeting,” he added. “On balance, then we expect the median dot still to show rates more likely to rise for the first time in 2023, but it will be close, and ultimately we still think the Fed will start to move next year.”
7:45 a.m. ET Wednesday: Stock futures advance before Fed decision
Here’s where markets were trading ahead of the opening bell:
S&P 500 futures (ES=F): +23.75 points (+0.55%), at 4,367.00
Dow futures (YM=F):+197.00 points (+0.58%), at 33,995.00
Nasdaq futures (NQ=F): +45 points (+0.3%) to 15,069.00
Crude (CL=F): $71.50 per barrel, +$1.01 (+1.43%)
Gold (GC=F): $1,773.50 per ounce, -$4.70 (-0.26%)
10-year Treasury (^TNX): +1.4 bps to yield 1.338%
6:15 p.m. ET Tuesday: Stock futures trade mixed after sell-off
Here were the main moves in markets as of Tuesday evening:
S&P 500 futures (ES=F): -4.75 points (-0.11%), at 4,338.5
Dow futures (YM=F): -37 points (-0.11%), at 33,761.00
Nasdaq futures (NQ=F): -31 points (-0.21%) to 14,993.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter