Stock futures opened slightly lower on Tuesday evening as traders awaited the Federal Reserve’s latest monetary policy decision and updated economic forecasts on Wednesday.
Contracts for the S&P 500 fell slightly. The index had previously closed up more than 2%, rising for the first time in four sessions as volatility swept through US equities. The Nasdaq Composite also ended a three-session losing streak, climbing almost 3%.
Energy prices reversed recent gains, with West Texas intermediate crude oil futures down more than 6% to hit $96.44 a barrel on Tuesday afternoon. This sent US oil into a bear market, where prices fell more than 20% from their recent closing high a week ago. Brent crude, the international standard, fell below $100 a barrel for the first time in more than two weeks.
Investors braced this week for the Federal Reserve’s latest monetary policy decision on Wednesday afternoon, which will likely mark the first of many rate hikes this year. The benchmark interest rate has now been kept close to zero since mid-2020, with the central bank using low rates and a range of other monetary policy tools to keep financial conditions afloat amid the pandemic. The last time the Fed raised interest rates was in 2018.
Fed Chairman Jerome Powell has already told Congress in recent weeks that he will support a 25 basis point rate hike. Such an increase would be consistent with the usual increase in the size of the Fed over each meeting over the past two decades and would begin a process of tightening financial conditions to gradually reduce demand and inflation, averting a shock to markets already recovering from the Russian invasion of Ukraine. .
And importantly, in addition to the decision to raise rates, the Fed will also publish an updated “Economic Forecasts Summary”, or “dot chart” showing central bank officials’ view of where interest rates and economic growth could go this year. year. In this regard, many experts expect the Fed to update its inflation and labor market forecasts this year.
The story goes on
Core personal consumption spending (PCE) — or the Fed’s preferred measure of inflation excluding volatile food and energy prices — last rose 6.1% year-on-year in January. And since then, more recent data on consumer and producer price inflation point to an even sharper price hike.
“The chart point should increase given all the news we have received from December to today,” Michael Cushma, chief investment officer at Morgan Stanley Investment Management, told Yahoo Finance Live Tuesday. “We have a strong labor market, inflation is higher than expected. Oil prices, energy prices, commodity prices are now much higher than they were then. All of this suggests that the Fed needs to act, and that they need to. So I think they will talk about the average, maybe five rate hikes in 2022 and a couple more in 2023.”
—
6:13 pm ET Tuesday: Equity futures mixed, Dow futures up 250+ points
Here’s where the stock traded on Monday morning:
S&P 500 Futures (ES=F): -3.5 points (-0.08%) to 4,258.50
Dow futures (UM=F): -22 points (-0.07%) to 33,510.00
Nasdaq futures (NQ=F): -1.5 points (-0.01%) to 13,450.25
NEW YORK, NEW YORK – MARCH 11: Traders work on the floor of the New York Stock Exchange (NYSE) on March 11, 2022 in New York City. The Dow Jones Industrial Average rose more than 200 points in morning trading on the final day of a volatile week for global markets. (Photo by Spencer Platt/Getty Images)
—
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance at Twitter, Instagram, YouTube, facebook, flipboardas well as LinkedIn