U.S. Stocks May Lack Direction As Fed Announcement Looms

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to show a lack of direction in early trading following the volatility seen in the previous session.

Traders may be reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement on Wednesday.

With the Fed widely expected to raise interest rates by 50 basis points, traders are likely to look to the accompanying statement for clues about how aggressively the central bank plans to tighten monetary policy.

After a weak start and a subsequent modest recovery, U.S. stocks tumbled on Monday but turned positive in the final hour to eventually end the session on a firm note.

The major averages all ended with solid gains, but it was the Nasdaq which hogged the limelight, surging 201.38 points or 1.6 percent as it settled at 12,536.02, rallying more than 330 points from a low of 12,202.41.

The Dow settled with a gain of 84.29 points or 0.3 percent at 33,061.50, rebounding from a low of 32,449.87, while the S&P 500 climbed from 4,062.51 to settle at 4,155.38, recording a gain of 23.45 points or 0.6 percent.

Traders, looking ahead to the Federal Reserve’s monetary policy announcement on Wednesday, largely shrugged off a report from the Institute for Supply Management showing growth in U.S. manufacturing activity unexpectedly slowed in the month of April.

The ISM said its manufacturing PMI fell to 55.4 in April from 57.1 in March. While a reading above 50 still indicates growth in the sector, economists had expected the index to inch up to 57.6.

The unexpected decrease by the headline index came as the employment index slumped to 50.9 in April from 56.3 in March.

A separate report released by the Commerce Department showed a modest increase in U.S. construction spending in the month of March.

The Fed is widely expected to announce a 50-basis point rate hike on Wednesday, the first such increase in about 20 years.

Netflix and Meta Platforms surged up 4.4 percent and 5.3 percent, respectively, contributing significantly to the rally in the final hour.

Microsoft gained about 2.5 percent and Alphabet, the Google parent, surged up 2.2 percent. Amazon and Apple edged up marginally thanks to some brisk buying in the closing minutes.

Intel climbed more than 3 percent. Home Depot, Chevron, Cisco Systems, Honeywell International, Walt Disney, Goldman Sachs, Nike, 3M, JP Morgan Chase and Salesforce.com also closed with strong gains.

Coca-Cola, American Express, United Health, P&G, Merck and McDonalds closed weak.

Commodity, Currency Markets

Crude oil futures are falling $0.89 to $104.28 a barrel after rising $0.48 to $105.17 a barrel on Monday. Meanwhile, after plunging $48.10 to $1,863.60 an ounce in the previous session, gold futures are sliding $6.60 to $1,857 an ounce.

On the currency front, the U.S. dollar is trading at 129.87 yen compared to the 130.16 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0564 compared to yesterday’s $1.0507.

Asia

Asian stocks ended Tuesday’s session mostly lower as investors braced for the Federal Reserve meeting on Wednesday, with the central bank poised to announce its biggest rate hike since 2000. A 50 basis point rate hike along with balance sheet reduction plans are likely to be unveiled at the meeting in an effort to control inflation.

The dollar hovered just below a 20-year high against a basket of currencies, while oil prices slipped after rising overnight on reports that European Union chiefs were discussing a possible embargo on shipments from Russia linked to its operations in Ukraine.

Trading volumes were thin amid public holidays around the region. Markets in China, Japan and India were closed. Hong Kong’s Hang Seng Index settled on a flat note at 21,101.89 as traders returned from a long weekend break.

South Korea’s Kospi dipped 0.3 percent to 2,680.46 after data showed inflation in the country accelerated in April to hit the highest level in more than 13 years.

In Australia, the benchmark S&P/ASX 200 Index closed 0.4 percent lower at 7,316.20 as the Reserve Bank raised its cash rate by 25 basis points to 0.35 percent, defying expectations for a hike of 15 basis points. It was the first interest rate rise in 11 years.

New Zealand’s NZX-50 Index ended down 0.9 percent at 11,675.92, notching its second negative close for the week. Move Logistics slumped 7.8 percent after announcing its turnaround was taking longer than anticipated due to headwinds in the sector.

Europe

European stocks were broadly higher on Tuesday after dip-buying in the technology sector boosted U.S. equity shares to a higher close overnight.

The upside remained capped ahead of the Federal Reserve meeting. The U.S. central bank is expected to hike interest rates by a half-a-percentage point when it hands down its policy decision on Wednesday – the first such increase in about 20 years.

While the U.K.’s FTSE 100 Index is down by 0.4 percent, the German DAX Index is up by 0.3 percent and the French CAC 40 Index is up by 0.5 percent.

German banks Commerzbank and Deutsche Bank have risen as the yield on the 10-year German bund reached the 1 percent level for the first time in nearly seven years in anticipation of quicker interest rate hikes.

Logistics firm Deutsche Post has added about 1 percent after posting higher profit for the first quarter and confirming its financial targets for 2022-2024. French lender BNP Paribas has also climbed after reporting a jump in first-quarter earnings.

Norwegian aluminum maker Norsk Hydro has fallen after it warned of rising costs.

British oil & gas firm BP Plc has rallied after its Q1 earnings topped estimates.

Galp Energia SGPS SA has fallen. The Portuguese energy company reported a swing to a net loss in the first quarter.

Swiss tech firm Logitech International has dropped after reporting a 20 percent fall in Q4 sales.

In economic news, Germany’s unemployment declined in April, the Federal Employment Agency reportedly said.

The number of people out of work decreased 13,000 from March, compared to the expected decline of 15,000. The jobless rate remained unchanged at 5.0 percent in April, in line with expectations.

Data published by Destatis earlier in the day showed that the jobless rate fell to a seasonally adjusted to 2.9 percent in March from 3.0 percent in February.

U.S. Economic Reports

The Commerce Department is scheduled to release its report on new orders for manufactured goods in the month of March at 10 am ET. Factory orders are expected to jump by 1.1 percent in March after falling by 0.5 percent in February.