Futures Pointing To Flat Open Ahead Of Fed Announcement

The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction in early trading.

Trading activity is likely to be subdued in the lead up to the Federal Reserve’s latest monetary policy announcement scheduled for 2 pm ET.

The Fed is likely to leave monetary policy unchanged, but traders will be paying close attention to any changes to the accompanying statement.

The central bank’s comments about its asset purchase program are likely to be in focus, as many analysts expect the Fed to signal that it is starting to think about tapering.

Along with the monetary policy announcement, the Fed is also due to provide updated projections for the economy, inflation and interest rates.

Traders are likely to keep a close eye on the latest interest rate projections, as the Fed’s previous forecast indicated rates would remain at near-zero levels through 2023.

With traders looking ahead to the Fed’s monetary policy, stocks moved to the downside during trading on Tuesday. The Nasdaq and the S&P 500 pulled back after ending Monday’s trading at new record closing highs.

The major averages all closed in negative territory, although the tech-heavy Nasdaq underperformed its counterparts. While the Nasdaq slid 101.29 points or 0.7 percent to 14,072.86, the Dow fell 94.42 points or 0.3 percent to 34,299.33 and the S&P 500 dipped 8.56 points or 0.2 percent to 4,246.59.

The Fed announcement is likely to acknowledge the recent increase in inflation, which was highlighted by Tuesday’s Labor Department report showing record annual producer price growth.

The Labor Department said its producer price index for final demand advanced by 0.8 in May after climbing by 0.6 percent in April. Economists had expected another 0.6 percent increase.

Excluding prices for food, energy, and trade services, core producer prices rose by 0.7 in May, matching the increase seen in the previous month. Core prices were expected to rise by 0.5 percent.

Compared to the same month a year ago, producer prices in May were up by 6.6 percent, reflecting the largest increase since 12-month data were first calculated in November 2010.

The annual rate of core producer price growth also accelerated to a record high of 5.3 percent in May from 4.6 percent in April.

Meanwhile, the Commerce Department released a separate report showing retail sales tumbled by more than expected in the month of May, although the steep drop followed a notable upward revision to the previous month’s data.

The report said retail sales plunged by 1.3 percent in May following an upwardly revised 0.9 percent increase in April.

Economists had expected retail sales to slump by 0.8 percent compared to the unchanged reading originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales still slid 0.7 percent in May after coming in unchanged in April. Ex-auto sales were expected to inch up by 0.2 percent.

The Fed also released a report showing industrial production increased by more than expected in the month of May after a downwardly revised uptick in the previous month.

The report said industrial production climbed by 0.8 percent in May after inching up by a revised 0.1 percent in April.

Economists had expected industrial production to rise by 0.6 percent compared to the 0.5 percent increase that had been reported for the previous month.

Gold stocks showed a significant move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 1.3 percent to its lowest closing level in a month.

The weakness among gold stocks came amid a continued decrease by the price of the precious metal.

Notable weakness was also visible among biotechnology stocks, as reflected by the 1.2 percent drop by the NYSE Arca Biotechnology Index.

Sage Therapeutics (SAGE) posted a steep loss as investors were disappointed by the results of a Phase 3 study of the major depressive disorder treatment the biopharmaceutical company is developing with Biogen (BIIB).

Networking, commercial real estate and software stocks also moved to the downside on the day, while energy stocks sharply higher along with the price of crude oil.

Commodity, Currency Markets

Crude oil futures are rising $0.28 to $72.40 a barrel after jumping $1.24 to $72.12 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,857.20, up $0.80 compared to the previous session’s close of $1,856.40. On Tuesday, gold slid $9.50.

On the currency front, the U.S. dollar is trading at 109.84 yen compared to the 110.08 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.2122 compared to yesterday’s $1.2126.

Asia

Asian stocks fell broadly on Wednesday as investors refrained from making big bets ahead of the U.S. Federal Reserve’s monetary policy announcement later in the day.

Amid the backdrop of growing evidence of pricing pressures building in the economy, investors await the U.S. central bank’s comments on inflation and the stimulus outlook.

China’s Shanghai Composite Index slumped 38.23 points, or 1.1 percent, to 3,518.33 as investors awaited a slew of economic data later in the day for directional cues. Hong Kong’s Hang Seng Index ended down 201.69 points, or 0.7 percent, at 28,436.84.

Trade tensions persisted, with Australia announcing it is preparing itself before asking the World Trade Organization (WTO) to resolve its wine-tariff trade dispute with Beijing.

The WTO action for arbitration is “under active consideration” and Australia would be “making a decision very shortly,” Australian Trade Minister Dan Tehan said.

Japanese shares closed lower as exports and core machinery orders data missed expectations. The Nikkei 225 Index dropped 150.29 points, or 0.5 percent, to 29,291.01, while the broader Topix finished marginally higher at 1,975.86.

Exports skyrocketed 49.6 percent year-on-year in May, missing forecasts for a jump of 51.3 percent. The overall value of core machine orders in Japan rose 0.6 percent sequentially in April, missing expectations for an increase of 2.7 percent.

Automaker Toyota Motor rose about 1 percent on economic recovery hopes, while Fast Retailing, the operator of Uniqlo, fell 2.7 percent and Sony gave up 2.9 percent.

Nintendo declined 2.8 percent after there was no Switch Pro announcement at its E3 show. Oil and gas explorer Inpex soared 3.7 percent, tracking a jump in oil prices.

Australian markets ended little changed as mining and tech stocks fell, offsetting gains in the energy and banking sectors.

Beach Energy, Oil Search, Origin Energy and Santos all rose over 1 percent as oil prices reached their highest in more than two years on expectations of a strong recovery in demand. Banks ANZ, Commonwealth and NAB rose between 0.7 percent and 1.3 percent.

Tech stocks underperformed, with Appen tumbling 4.3 percent. Weaker copper prices weighed on the mining sector, with BHP and Fortescue Metals Group ending down 1.7 percent and 1.6 percent, respectively. OZ Minerals lost 6.7 percent. Gold miners also ended broadly lower.

Seoul stocks hit a fresh record high for the third straight day on hopes for a vaccine-driven economic recovery. The Kospi climbed 20.05 points, or 0.6 percent, to finish at 3,278.68, extending its winning streak to five sessions.

Samsung Electronics and Hyundai Motor both rose over 1 percent, while LG Household & Health Care shares surged 6.7 percent. Naver added 1 percent on reports that its consortium with retail giant E-Mart has been picked as the preferred bidder for eBay Korea.

Europe

European stocks have struggled for direction on Wednesday after Chinese factory output, investment growth and retail sales figures all missed expectations due to disruptions caused by COVID-19 outbreaks in the country’s southern export powerhouse of Guangdong.

Meanwhile, data from the Office for National Statistics showed earlier in the day that U.K. consumer price inflation accelerated to 2.1 percent in May from 1.5 percent in April. This was above economists’ forecast of 1.8 percent and the Bank of England’s target of 2 percent.

Amid the backdrop of growing evidence of pricing pressures building in the economy, investors await the U.S. central bank’s comments on inflation and the stimulus outlook later in the day.

While the German DAX Index is down by 0.2 percent, the U.K.’s FTSE 100 Index and the French CAC 40 Index are both just above the unchanged line.

Spanish solar power developer Solarpack has moved sharply higher after reports that a fund affiliated with Swedish investment firm EQT AB is looking to buy and delist the company.

EverArc Holdings has also soared after announcing it would buy firefighting products and lubricant additives manufacturer Perimeter Solutions in a deal valued at about $2 billion.

Tullow Oil has also risen. The company said that group production to the end of May 2021 averaged 62,000 bopd, in line with expectations.

Meanwhile, miners Anglo American and Glencore have fallen after China’s stockpiling body said it would release national reserves of major industrial metals in an effort to rein in surging commodities.

German business software group SAP has also fallen after a disappointing profit forecast from U.S. software rival Oracle Corp.

U.S. Economic Reports

After reporting a sharp pullback in new residential construction in the U.S. in the previous month, the Commerce Department released a report on Wednesday showing housing starts rebounded in the month of May.

The Commerce Department said housing starts jumped by 3.6 percent to an annual rate of 1.572 million in May after plunging by 12.1 percent to a revised rate of 1.517 million in April.

Economists had expected housing starts to surge by 3.9 percent to a rate of 1.630 million from the 1.569 million originally reported for the previous month.

Meanwhile, the report said building permits slumped by 3.0 percent to an annual rate of 1.681 million in May after falling by 1.3 percent to a revised rate of 1.733 million in April.

Building permits, an indicator of future housing demand, had been expected to decrease by 1.7 percent to a rate of 1.730 million from the 1.760 million originally reported for the previous month.

A separate report from the Labor Department showed import prices increased by more than expected in the month of May.

The Labor Department said import prices jumped by 1.1 percent in May after climbing by an upwardly revised by 0.8 percent in April.

Economists had expected import prices to increase by 0.8 percent compared to the 0.7 percent advance originally reported for the previous month.

The report also showed export prices spiked by 2.2 percent in May after surging by an upwardly revised 1.1 percent in April.

Economists had expected export prices to climb by 0.8 percent, matching the increase originally reported for the previous month.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended June 11th.

Crude oil inventories are expected to decrease by 3.0 million barrels after falling by 5.2 million barrels in the previous week.

At 2 pm ET, the Federal Reserve is scheduled to announce its latest monetary policy decision and provide updated economic projections. Fed Chair Jerome Powell’s post-meeting press conference will follow at 2:30 pm ET.

Stocks In Focus

Shares of Oracle (ORCL) are moving sharply lower in pre-market trading after the business software giant reported better than expected fiscal fourth quarter results but provided disappointing guidance.

Online game platform Roblox (RBLX) may also come under pressure after reporting a monthly decrease in daily active users.

On the other hand, shares of Kindred Biosciences (KIN) are soaring in pre-market trading after the pet therapeutics company agreed to be acquired by Elanco Animal Health (ELAN) for $9.25 per share or approximately $440 million.

Satellite TV company DISH Network (DISH) may also move to the upside after Pivotal Research upgraded its rating on the company’s stock to Buy from Hold.