Investing.com – Wall Street futures pointed to a slightly higher open on Thursday as markets took a breather after disappointment from the Federal Reserve (Fed) meeting minutes released a day earlier and looked ahead to the widely anticipated meeting between U.S. President Donald Trump and China’s President Xi Jinping.
The blue-chip Dow futures gained 29 points, or 0.14%, by 6:51AM ET (10:51GMT), the S&P 500 futures rose 3 points, or 0.14%, while the tech-heavy Nasdaq 100 futures traded up 8 points, or 0.15%.
The minutes from the Fed meeting in March when the central bank raised interest rates by 25 basis points showed that most policymakers believed they should start unwinding its massive balance sheet “later this year”, much sooner than many had expected, despite comments to that effect just last week by New York Fed president William Dudley.
The tone of the minutes surprised markets causing the Dow to post its largest intraday downside reversal in 14 months.
Markets, however, made little adjustment to rate hike expectations with odds for a June increase still priced in, just as before the release, at around 59%, according to Investing.com’s Fed Rate Monitor Tool.
However, it should be noted that the start of balance sheet reduction would be considered as a de facto rate hike.
"If we start to normalize the balance sheet, that's a substitute for short-term rate hikes because it would also work in the direction of tightening financial conditions," Dudley explained last week.
San Francisco Fed president John Williams indicated Thursday that two further rate hikes this year was a good starting point and added that there could be a total of four hikes if inflation data improves.
Regardless, Williams insisted that normalizing interest rates and the balance sheet was something that would occur over years.
With Fed policy tightening in the backdrop, the main focus of the market on Thursday is the highly-anticipated meeting between the leaders of the world’s two largest economies at Trump's Mar-a-Lago retreat in Florida.
The two-day summit between the world's two most powerful leaders is expected to cover differences over trade, currencies and North Korea.
Trump has repeatedly criticized China's economic policies and pledged to label China a currency manipulator on the first day of his administration, but so far he has not.
The U.S. President warned in a tweet last week that the meeting will be “a very difficult one”.
Also on the docket for Thursday, market players will digest weekly jobless claims, coming just after the ADP report released a day earlier showed the creation of a blockbuster 263,000 jobs in March and while investors wait for the official government data on Friday.
On the business front, CarMax (NYSE:KMX), Constellation Brands (NYSE:STZ) and Rite Aid (NYSE:RAD) were among companies set to report earnings on Thursday.
Meanwhile, oil prices edged up on Thursday as they recovered from losses triggered by record levels of U.S. crude stockpiles.
U.S. crude futures gained 0.27% to $51.29 by 6:52AM ET (10:52GMT), while Brent oil rose 0.40% to $54.48.