US stocks are expected to start little changed on Wednesday, nursing the previous session’s sharp falls as traders brace for the release of minutes from the Federal Reserve’s latest meeting and more insight on the central bank’s future policy agenda.
Futures for the Dow Jones Industrial Average (DJIA) added just 0.01%, while those for both the S&P 500 and Nasdaq-100 fell marginally, down 0.01%.
The Nasdaq Composite led the losses on Tuesday, falling 2.5%, while the S&P 500 slumped 2.0%, and the DJIA dropped 2.1% and turned negative for the year.
Mounting concerns that the Fed will continue hiking rates spooked investors and pushed stocks to their worst day of 2023. A slew of earnings reports, including disappointing results from Home Depot also sparked concerns about the health of the consumer.
Attention now shifts toward the Fed minutes due out at 2.00pm ET on Wednesday, which investors will pour over for clues to the central bank’s future rate hiking path after its recent 25 basis point increase.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank commented: “We know that the Fed officials will sound concerned with the strong jobs market and will point at the resilience of the economy to continue hiking the rates.
“So, the chances are that the minutes will be hawkish, and could further weigh on sentiment. But there is always a chance that the market sees the glass half full than half empty.”
“But,” she added, “the negative correlation between stocks and bonds, after stocks rallied and bonds fell – the exact opposite of what we have predicted at the start of the year – may be coming to an end, as in the absence of recession talk, the Fed expectations will continue driving markets, and the increasingly hawkish Fed expectations are bad for both stock and bond valuations.”
The US corporate earnings season rolls on with results due later from Etsy. Nvidia and Baidu.
Among the early movers pre-market, shares of Palo Alto Networks rose after the cybersecurity company lifted its earnings forecast for the year and crypto exchange platform Coinbase was flat to lower despite topping revenue expectations.