Stock futures rise slightly as investors brace for a big Fed rate hike

Stock futures rose slightly in overnight trading Tuesday as investors anxiously awaited aggressive action by the Federal Reserve to rein in rising inflation.

Dow Jones Industrial Average futures are up 70 points. S&P 500 futures rose 0.3 percent and Nasdaq 100 futures gained 0.4 percent.

The S&P 500 index went through a five-day losing streak on Tuesday, plunging deeper into bear market territory. The equity benchmark has fallen more than 4% this week and is now down more than 22% from its all-time high in early January. The blue-chip Dow fell about 150 points on Tuesday, also falling for a fifth straight day on Tuesday. The Nasdaq Composite ended Tuesday slightly higher.

The Federal Open Market Committee that sets the rate will conclude its two-day meeting on Wednesday. Markets are betting on a 94% chance of a 75 basis point rate hike, the biggest increase since 1994, according to FedWatch by CME Group tool. (1 basis point equals 0.01%)

The shift to price in a larger-than-usual rate hike has arrived after the title that Fed officials contemplated such a move after surprisingly hot inflation and a deteriorating economic outlook.

“The change in headlines from 50 basis points to 75 basis points reflects a stark reality, but it also reflects the Fed’s determination to underline its commitment to the mission of maintaining stability. price,” said Quincy Krosby, chief equity strategist at LPL Financial. “It’s not a test balloon nor a fuse balloon – that’s reality.”

Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m. ET following the central bank’s policy decision. Investors will be watching his language and tone on the Fed’s future tightening path. The central bank will also give its outlook on the benchmark rate, inflation and GDP.

Treasury yields have spiked this week in anticipation of a major rate hike. The two-year interest rate, most sensitive to changes in monetary policy, rose 40 basis points this week alone, reaching its highest level since 2007. The benchmark 10-year yield is up more than 30 basis points. copies to a peak of 3.48%, an all-time high. since April 2011.

Some notable investors believe that the central bank can regain credibility by acting aggressively to show its seriousness in fighting inflation.

The Fed “letted inflation get out of control. Stock and credit markets have therefore lost confidence in the Fed,” Pershing Square’s Bill Ackman wrote in a tweet Tuesday. “Market confidence could be restored if the Fed takes positive action with 75 bps tomorrow and in July” and gives a pledge to increase sharply until inflation “contains”.

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