U.S. stock futures rise as market awaits what could be the biggest Fed rate hike since 2000
Posted On May 4, 2022
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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, +0.33% rose 117 points, or 0.3%, to 33,150
- S&P 500 futures ES00, +0.38% rose 0.3% to 4,185
- Nasdaq-100 futures NQ00, +0.34% rose 0.3% to 13,126
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, 2.958% was steady at 2.957%, while that of the 2-year TMUBMUSD02Y, 2.780% was up 2 basis points to 2.776%.
Ahead of Friday’s monthly U.S. employment data, investors will get the ADP private-sector employment report at 8:15 a.m. Eastern Time Wednesday, a March update on the international trade balance, due at 8:30 a.m., followed by the Institute for Supply Management’s April services index at 10 a.m. Eastern.
Oil was also in focus, with prices for both Brent BRN00, +4.22% BRNN22, +4.22% and West Texas Intermediate crude CL00, +4.35% CL.1, +4.35% CLM22, +4.35% up over 3% 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?
- Lyft Inc. LYFT, -2.35% stock tumbled 27% in premarket trading after the ride-hailing group reported a better-than-expected first quarter, but profit and sales guidance disappointed. Shares of rival Uber Technologies Inc. UBER, -3.03% fell around 5%, as the company said it would release its own earnings announcement earlier, ahead of Wednesday’s market open.
- Herbalife Nutrition Ltd. HLF, +3.07% slid 16% towards a two-year low after the multilevel marketing company announced forecast reductions due to newer “distribitors.
- Airbnb Inc. ABNB, -5.09% shares climbed 5% after the lodging-booking company reported forecast-beating results and said it surpassed 100 million nights booked in a quarter for the first time.
- Match Group Inc. MTCH, -2.07% stock tumbled 6% after the online-dating company’s revenue outlook fell short of expectations.
- Starbucks Inc. SBUX, -1.38% stock rose 4% after the coffee giant reported in-line earnings, amid rising costs and inflation and thinner margins. Chief Executive Howard Schultz said “record” demand was helping accelerate store-growth plans.
How did other assets fare?
- The ICE U.S. Dollar Index DXY, -0.08%, a measure of the currency against a basket of six major rivals, was down 0.3%.
- Gold futures GC00, -0.09% slipped, with gold for June delivery GCM22, -0.09% eased modestly to to $1,869.50 an ounce.
- Bitcoin BTCUSD, +3.68% was up 1.8% at $38,993
- In European equities, the Stoxx Europe 600 SXXP, -0.45% fell 0.5%. London’s FTSE 100 UKX, -0.37% dropped 0.5%.
- 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.