Benzinga - by Shanthi Rexaline, Benzinga Editor.
Trading in stock futures reflects the cautious sentiment of traders as they await a key rate decision from the Federal Reserve, which is widely expected to deliver a hawkish pause. Stocks could tread water until the rate decision and a pause, in line with expectations, could jumpstart a rally. The dot-plot curve, which is released along with the summary of economic projections and the tone of Fed Chair Jerome Powell at the press conference, could set the tempo for the rest of the session.
Cues From Tuesday's Trading:
Stocks were pressured on Tuesday by a surge in bond yields, elevated oil prices, and anxiety about the Fed decision. The major averages opened lower and languished in the red throughout the session before closing modestly lower.
Most S&P sectors, except for healthcare and IT services stocks, moved lower for the session.
US Index Performance On Tuesday
| Index | Performance (+/-) | Value |
| Nasdaq Composite | -0.23% | 13,678.19 |
| S&P 500 Index | -0.22% | 4,443.95 |
| Dow Industrials | -0.31% | 34,517.73 |
| Russell 2000 | -0.42% | 1,826.53 |
Analyst Color:
The Fed meeting is likely to offer a positive surprise even if the outcome is in line with expectations, said Fund Strat’s Tom Lee. The deduction is based on his view that the S&P 500 Index is “oversold pretty badly,” he said going into the Fed meeting.
“It’s disturbing to see interest rates creep up,” Lee said, adding that there could be an important pivot on Wednesday. “It just depends on how the markets react to the Fed statement,” he said.
Comerica Chief Investment Officer John Lynch said, “While investors will be focused on the monetary policy decision this week, we believe the more important information to glean will come from the infamous ‘dot plot’ which could clarify Fed expectations regarding a ‘higher for longer’ policy.'”
“Though we do not expect the 10-year yield to exceed the 5.00% range, we do believe yields are headed higher, particularly in an environment where the Federal Reserve continues to shrink its balance sheet.”
Futures Today
Futures Performance On Wednesday
| Futures | Performance (+/-) |
| Nasdaq 100 | +0.12% |
| S&P 500 | +0.16% |
| Dow | +0.20% |
| R2K | +0.46% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) rose 0.18% to $443.50, and the Invesco QQQ ETF (NASDAQ:QQQ) gained 0.14% to $370.37, according to Benzinga Pro data.
Upcoming Economic Data:
The Mortgage Bankers’ Association will release the mortgage application volume data at 7 a.m. EDT. Data for the week ended Sept. 8 showed mortgage applications volume declining a seasonally adjusted 0.8% week-over-week, reaching the lowest level since 1996.
The Energy Information Administration is due to release its customary weekly petroleum status report at 10:30 a.m. EDT.
The Federal Open Market Committee will announce its interest rate decision through its post-meeting policy statement at 2 p.m. Economists, on average, expect the central bank to hold the fed funds rate unchanged at 5.25%-5.50%. The Fed will also release its updated summary of economic projects and the dot-plot curve, which would relay the staffers’ expectations concerning the interest rate trajectory.
Chairman Powell will host a press conference at 2:30 p.m. EDT to explain the rate decision.
Stocks In Focus:
- Pinterest, Inc. (NYSE:PINS) climbed over 3% in premarket trading after JPMorgan raised the price target for the stock. The company announced the appointment of Scott Schenkel, former CFO and Interim CEO of eBay, to its board.
- Dollar General Corp. (NYSE:DG) fell about 2% in reaction to a downgrade by JPMorgan.
- General Mills, Inc (NYSE:GIS) and KB Home, Inc. (NYSE:KBH) are due to report their quarterly results before the market open.
- Darden Restaurants, Inc. (NYSE:DRI) and FactSet Research Systems, Inc. (NYSE:FDS) will announce their earnings reports after the market close.
Crude oil futures fell 0.63% to $89.91 in early European session on Wednesday following Tuesday’s 0.11% drop.
The benchmark 10-year Treasury note fell 0.022 percentage points to 4.345% after spiking to a 16-year high on Tuesday.
Most Asian markets declined on Wednesday, with India that reopened after a public holiday, leading the slide. Traders in the region took stock of the People’s Bank of China’s decision to hold one-year and five-year loan prime lending rates unchanged at 3.45% and 4.20%, respectively. Some chose to remain on the sidelines ahead of the Fed decision.
European stocks advanced in late-morning trading on Wednesday.
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