6.30am: Investors looking to Jerome Powell for clues
Wall Street is expected to open lower as February trading gets underway, with investors anticipating the outcome of the US Federal Reserve’s first interest rate decision of the year and look to a raft of quarterly earnings reports from large tech companies.
Futures for the Dow Jones Industrial Average (DJIA) fell 0.4% in Wednesday pre-market trading, while those for the broader S&P 500 index also shed 0.4%, and contracts for the Nasdaq-100 declined 0.3%.
The Federal Open Market Committee wraps up its two-day rate-setting meeting today with a 25 basis point (bps) hike expected, to be followed by a press conference with Fed Chair Jerome Powell that will be watched closely for clues on the future path for interest rates.
Ahead of that, the major US indexes ended higher on Tuesday, with the DJIA closing up 1.1% at 34,086, the Nasdaq Composite adding 1.7% to 11,585, and the S&P 500 gaining 1.5% to 4,077. That took January’s gains for the Nasdaq to 10.7%, while the S&P rallied 6.2% and the Dow added 2.8%.
“After a very positive January, the start of February today marks a pivotal three days for markets that have the potential to decisively set the tone for the weeks ahead,” Deutsche Bank strategist Jim Reid commented in a morning note to clients.
“We have the Fed’s latest policy decision and Chair Powell’s press conference tonight. Then tomorrow we’ve got more policy decisions from the ECB and the BoE, an array of major earnings including Apple, Amazon and Alphabet, followed up by the US jobs report for January on Friday,” he added.
When it comes to the Fed’s decision, while a 25 bps rate hike is now widely expected by both markets and economists, anything other than that would be a massive shock, Reid noted.
“It would also mark the first ‘normal’ sized hike since March 2022 when this hiking cycle began, before they embarked on a series of supersized hikes to swiftly get the policy rate into restrictive territory,” he said. “Given that the 25bps move is anticipated, the main focus today will instead be on any changes to forward guidance, both in the statement and from Fed Chair Powell’s press conference.”
Meanwhile, companies reporting quarterly earnings today include Facebook, Alibaba, Novartis, Accenture, and T-Mobile. Thursday sees Apple, Amazon and Alphabet releasing their latest financial statements.