Interest Rate Concerns May Weigh On Wall Street Ahead Of Fed Announcement

The major U.S. index futures are currently pointing to a lower open on Wednesday, with stocks likely to move back to the downside following the rebound seen in the previous session.

Concerns about the outlook for interest rates may weigh on the markets ahead of the Federal Reserve’s monetary policy announcement this afternoon.

With the Fed widely expected to leave interest rates unchanged, traders will pay close attention to the accompanying statement as well as Fed Chair Jerome Powell’s post-meeting press conference.

Recent economic data has led to worries about the Fed leaving rates on hold for a prolonged period, but many economists still expect the central bank to resume cutting rates sometime in the first half of the year.

CME Group’s FedWatch Tool is currently indicating a 75.3 percent chance rates will be lower by at least a quarter point following the Fed’s June meeting.

The downward momentum on Wall Street also comes as traders look ahead to the release of earnings news from big-name companies like Microsoft (MSFT), IBM (IBM), Meta Platforms (META) and Tesla (TSLA) after the close of today’s trading.

After seeing considerable weakness in the previous session, stocks showed a strong move back to the upside during trading on Tuesday. The tech-heavy Nasdaq led the way higher after posting a particularly steep loss on Monday.

The Nasdaq surged 391.75 points or 2.0 percent to 19,733.59, partly offsetting the 3.1 percent plunge seen during Monday’s session. The S&P 500 also jumped 55.42 points or 0.9 percent to 6,067.70, while the narrower Dow rose 136.77 points or 0.3 percent to 44,850.35.

The strength on Wall Street came as some traders looked to pick up technology stocks at somewhat reduced levels following the sell-off seen in the sector during Monday’s trading.

Shares of Nvidia (NVDA) soared by 8.8 percent after the AI darling and market leader plunged by 17.0 percent in yesterday’s session.

Buying interest was somewhat subdued, however, as traders looked ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

In U.S. economic news, a report released by the Commerce Department unexpectedly showed a steep drop by new orders for U.S. manufactured durable goods in the month of December amid a nosedive by orders for transportation equipment.

The Commerce Department said durable goods orders plunged by 2.2 percent in December after tumbling by a revised 2.0 percent in November.

Economists had expected durable goods orders to climb by 0.8 percent compared to the 1.2 percent slump that had been reported for the previous month.

However, excluding the steep drop by orders for transportation equipment, durable goods orders rose by 0.3 percent in December after edging down by 0.2 percent in November. Ex-transportation orders were expected to increase by 0.4 percent.

The Conference Board also released a report showing its U.S. consumer confidence index decreased from a notably upwardly revised level in January.

The report said the consumer confidence index slid to 104.1 in January from an upwardly revised 109.5 in December.

Economists had expected the consumer confidence index to climb to 106.3 from the 104.7 originally reported for the previous month.

Software stocks turned in some of the market’s best performances on the day, resulting in a 3.0 percent surge by the Dow Jones U.S. Software Index.

Considerable strength was also visible among brokerage stocks, as reflected by the 1.3 percent gain posted by the NYSE Arca Broker/Dealer Index.

Semiconductor and networking stocks also regained ground following yesterday’s sell-off, while airline stocks showed a significant move to the downside, dragging the NYSE Arca Airline Index down by 2.4 percent.

Oil producer, commercial real estate and pharmaceutical stocks also saw notable weakness, partly offsetting the strength in the aforementioned sectors.

Commodity, Currency Markets

Crude oil futures are slipping $0.29 to $73.48 a barrel after climbing $0.60 to $73.77 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $2,792.50, down $2.10 compared to the previous session’s close of $2,794.60. On Tuesday, gold surged $28.40.

On the currency front, the U.S. dollar is trading at 155.29 yen compared to the 155.54 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0390 compared to yesterday’s $1.0430.

Asia

Asian stocks rose in thin trading on Wednesday, with markets in the region including China, Hong Kong, Singapore and South Korea closed for Lunar New Year holidays.

Technology stocks rebounded as investor angst ebbed over the emergence of a low-cost Chinese AI model.

Market attention turned to U.S. mega-cap tech company earnings, including Facebook owner Meta Platforms, Microsoft and Tesla, as well as the Federal Reserve’s first interest rate decision in 2025 due later in the day.

The dollar held steady in Asian trading following two days of consecutive advances. Gold ticked lower, while oil prices were mixed.

Japanese markets rallied as a weaker yen boosted export-related stocks. The Nikkei 225 Index jumped 1.0 percent to 39,414.78, snapping three days of declines. The broader Topix Index settled 0.7 percent higher at 2.775.59.

Panasonic rose about 1 percent and Sony surged 3.8 percent. SoftBank advanced 2.4 percent after a recent rout, Advantest jumped 4.4 percent and Tokyo Electro added 2.3 percent.

Australian shares advanced after data showed core inflation eased by more than expected in the final three months of 2024, fueling bets for a quarter point easing by the RBA in February.

The benchmark S&P/ASX 200 Index climbed 0.6 percent to 8,447.00, while the broader All Ordinaries Index ended up 0.7 percent at 8,700.70.

Financials led the surge, with banks like Westpac and ANZ nearing record highs. Energy stocks and gold miners also pushed higher while falling copper prices weighed on the mining sector.

Star Entertainment soared 13 percent after the company said it would divest its Star Sydney Event Centre assets to theatre owner and operator Foundation Theatres for A$60 million to bolster liquidity.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index gained 0.4 percent to end at 13,003.04.

Europe

European stocks have moved mostly higher on Wednesday as global markets recover from a tech sell-off sparked by concerns over the emergence of a low-cost Chinese AI model.

Investors also digested a slew of corporate earnings results and looked ahead to the Federal Reserve’s interest rate decision later in the day for direction.

In economic news, Germany’s GfK Consumer Sentiment Index for February fell to -22.4, down from -21.4 and missing expectations for a score of -20.5.

The pan European STOXX 600 Index is up 0.5 percent after rising 0.4 percent in the previous session.

The German DAX Index is up by 0.6 percent and the U.K.’s FTSE 100 Index is up by 0.3 percent, although the French CAC 40 Index has bucked the uptrend and fallen by 0.5 percent.

British travel retailer WH Smith has surged after reporting higher revenue growth for the 21-week period ended Jan.

Cruise operator Carnival has also risen. The company has priced its private offering of $2.0 billion aggregate principal amount of 6.125 percent senior unsecured notes due 2033.

Fresnillo has also jumped. The precious metals miner met guidance with silver output in 2024 and marginally beat expectations with gold production.

Logitech International, a Swiss computer peripherals maker, has also spiked after reporting better-than-expected third quarter results and raising its full-year guidance.

ASML Holding shares have also soared. The semiconductor giant reported fourth-quarter net bookings of 7.09 billion euros, up 169 percent quarter-over-quarter.

Swedish truck maker Volvo Group has also surged as it posted a significant upswing in order intake during the fourth quarter.

On the other hand, French luxury group LVMH has moved sharply lower as its fourth quarter sales failed to impress.

Remy Cointreau, the maker of Remy Martin cognac and Cointreau liquor, has also tumbled after announcing it was expecting an organic decline in annual sales at the lower end of its forecast range.

U.S. Economic News

The Energy Information Administration is due to release its report on oil inventories in the week ended January 24th at 10:30 am ET.

Crude oil inventories are expected to jump by 3.7 million barrels after falling by 1.0 million barrels in the previous week.

The Federal Reserve is scheduled to announce its monetary policy decision at 2 pm ET, followed by Fed Chair Jerome Powell’s post-meeting press conference at 2:30 pm ET.