Stock futures were slightly lower early Wednesday as investors braced for the Federal Reserve’s next move in its inflation-fighting rate hiking plan.
Futures tied to the Dow Jones Industrial Average fell 50 points, or 0.15%. S&P 500 futures were down 0.2%, while Nasdaq 100 futures were 0.37% lower.
In regular trading the major averages rose for a second day. The Dow Jones Industrial Average
added 316 points, or nearly 1%. The S&P 500
jumped 1.3%, and the Nasdaq Composite
gained 1.58%.
The moves came as fears over the ongoing banking crisis showed signs of easing, with investors “heartened by the increasing likelihood that the end of Fed policy tightening is near,” said Brian Levitt, global market strategist for Invesco.
“Fed tightening cycles typically end with a crisis, and those crises tend to end with policy responses. That may help to explain today’s market moves,” he added.
Investors are looking forward to the latest update from the Fed, at the conclusion of its two-day policy meeting on Wednesday. Most investors expect the central bank to stay committed to its tightening and raise rates by 25 basis points.
As of Tuesday evening, there is about a 89% chance of a quarter-point increase by the Fed, according to CME Group’s FedWatch tool. Meanwhile, there’s a roughly 11% probability of there being no hike.
“We think the Fed will take that next step, that 25 basis point increase, but probably wrap that in some pretty dovish language to indicate they’re close to the end, if not at the end,” said Neuberger Berman’s Erik Knutzen said on CNBC’s “Closing Bell.” “In a way, it almost doesn’t matter, it’s priced in. What’s most important is the broad liquidity being provided through the Fed’s balance sheet and some of the programs they put in place, the liquidity they provided last week.”
He added that that could lead to “considerable tightening, as banks change their posture in this more challenging environment — and that’s the part that we think is going to have the biggest negative impact on the economy.”
Elsewhere, investors are expecting an update on the latest MBA mortgage purchase applications reading. There are also a handful of companies slated to post results Wednesday, including Tencent and Winnebago.
This article was originally published by CNBC.
