U.S. stock futures were only marginally above zero on Wednesday, as traders adopted a cautious stance ahead of a day packed with potentially market-shifting events. The Federal Reserve is set to reveal its updated forecasts for interest rates for the rest of 2024 and beyond. However, these projections could be shaped by the results of a crucial May inflation reading, which will be announced before the conclusion of the central bank’s latest two-day policy meeting.
1-Futures muted
U.S. stock futures were broadly subdued on Wednesday, as investors prepared for a highly anticipated Federal Reserve interest rate decision and the release of fresh inflation data out of the world’s largest economy.
By 03:38 ET (07:38 GMT), the Dow Jones Industrial Average futures had risen 30 points or 0.1%, while S&P 500 futures and Nasdaq 100 futures were mostly unchanged.
The benchmark S&P 500 and tech-heavy Nasdaq Composite both reached record high closing levels for a second consecutive session on Tuesday, boosted in part by a jump in Apple Inc. (NASDAQ:AAPL) shares. The tech giant had released new artificial intelligence-enhanced features at its annual developers conference earlier in the week, in a bid to bolster demand for its devices.
Investors are now turning their attention to the conclusion of a two-day Fed policy meeting, which will be preceded by the publication of May’s consumer price index – a crucial gauge of price growth in the U.S. – prior to the opening bell on Wall Street.
2- Fed decision ahead
Fed officials are widely expected to leave interest rates at a more than two-decade high of 5.25% to 5.5% on Wednesday, meaning the central bank’s outlook for future borrowing costs will be in the spotlight.
3-CPI looms large
The Labor Department’s latest consumer price index (CPI), which is scheduled to be released roughly 30 minutes before the Fed reconvenes for the second day of its latest policy gathering, could present a last-minute complication in the central bank’s policy projections.
Economists forecast that the annualized headline price growth in May matched the previous month’s pace, but slowed on a monthly basis. The so-called “core” reading, which excludes more volatile items like food and fuel, is expected to decelerate slightly year-on-year and remain in line with April’s rate month-on-month.
A higher-than-anticipated CPI report could lead Fed officials to moderate their predictions for rate cuts in 2024, while a softer reading may convince more of them to estimate as many as two cuts. Analysts cited by the Wall Street Journal have suggested that a median average of at least two cuts would be needed to support hopes for a reduction by September, while a median of only one would signal that a cut would not come until even later this year.
4-Chinese consumer price inflation weaker than anticipated in May
Chinese consumer prices grew less than expected in May as consumption remained largely languid in the face of an uncertain economic recovery.
Meanwhile, producer prices shrank at a slower-than-expected pace, marking its smallest contraction since February 2023 amid signs of a possible rebound in the industrial sector.
The country’s consumer price index (CPI) rose 0.3% year-on-year in May, data from the National Bureau of Statistics showed on Wednesday. The reading was weaker than expectations for a 0.4% rise and unchanged from the prior month. Month-on-month CPI inflation shrank 0.1%.
The producer price index shrank 1.4% year-on-year in May versus projections for a 1.5% drop and a 2.5% decline in April.
4-Crude prices rise
Crude prices rose on Wednesday, buoyed by a series of upbeat views on global demand.
By 03:33 ET, U.S. crude futures (WTI) traded 0.8% higher at $78.52 per barrel, while the Brent contract climbed 0.6% to $82.41 a barrel.
Data from the American Petroleum Institute, released on Tuesday, showed that U.S. oil inventories shrank by more than expected last week, ramping up hopes that U.S. fuel consumption was picking up with the onset of the travel-heavy summer season.
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