Traders May Stick To The Sidelines 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 following the sharp pullback seen in the previous session.

Traders may be reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement later this afternoon.

CME Group’s FedWatch Tool is currently indicating a 99.0 percent chance the Fed will once again leave interest rates unchanged.

With the Fed almost universally expected to leave rates unchanged, traders will look to the accompanying statement as well as officials’ latest projections for clues about the outlook for rates.

The FedWatch Tool currently suggests the Fed is likely to leave rates unchanged again at its next meeting in early May, but the chances of a rate cut increase in June and July.

At the Fed’s most recent meeting in late January, the central bank left rates unchanged after it lowered rates by a total of 100 basis points or 1.0 percentage point over the three previous meetings, beginning with a 50 basis point cut last September.

Stocks moved sharply lower during trading on Tuesday, giving back ground following the significant rebound seen over the two previous sessions. The major averages all moved to the downside, with the tech-heavy Nasdaq leading the pullback.

The major averages ended the day off their worst levels but still firmly negative. The Nasdaq tumbled 304.55 points or 1.7 percent to 17,504.12, the S&P 500 slumped 60.46 points or 1.1 percent to 5,614.66 and the Dow slid 260.32 points or 0.6 percent to 41,581.31.

The sharp pullback on Wall Street came as traders cashed in on the recovery seen over the two previous sessions, which saw the Nasdaq and S&P 500 rebound after hitting six-month lows last Thursday.

Concerns about the impact of President Donald Trump’s trade policies continued to weigh on Wall Street along with worries about the economic outlook despite the release of some upbeat economic data.

The Federal Reserve released a report showing industrial production in the U.S. increased by much more than expected in the month of January.

The report said industrial production climbed by 0.7 percent in February after climbing by a downwardly revised 0.3 percent in January.

Economists had expected industrial production to rise by 0.2 percent compared to the 0.5 percent growth originally reported for the previous month.

The Commerce Department also released a report showing new residential construction rebounded by much more than anticipated in the month of February.

Meanwhile, traders were also looking ahead to the Federal Reserve’s latest monetary policy announcement on Wednesday.

Biotechnology stocks saw considerable weakness on the day, resulting in a 1.9 percent slump by the NYSE Arca Biotechnology Index.

Significant weakness was also visible among airline stocks with the NYSE Arca Airline Index falling by 1.8 percent.

Computer hardware, semiconductor and software stocks also saw notable weakness, contributing to the steep drop by the tech-heavy Nasdaq.

Commodity, Currency Markets

Crude oil futures are slipping $0.09 to $66.81 a barrel after falling $0.68 to $66.90 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $3,045.50, up $4.70 compared to the previous session’s close of $3,040.80. On Tuesday, gold surged $34.70.

On the currency front, the U.S. dollar is trading at 149.60 yen compared to the 149.27 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0912 compared to yesterday’s $1.0945.

Asia

Asian stocks ended mixed on Wednesday as Middle East tensions escalated and investors awaited the Federal Reserve’s projections for economic growth and inflation against the backdrop of U.S. President Donald Trump’s aggressive stance on tariffs.

Israeli airstrikes on Gaza killed over 400, reigniting a conflict that has claimed 48,500 Palestinian lives.

Adding to the unease, Russian President Vladimir Putin rejected an immediate and full ceasefire in Ukraine, agreeing only to halt attacks on energy infrastructure for 30 days.

The dollar index was firm as tensions flared over Gaza and Trump’s tariffs. Gold held near record highs, while oil extended losses after the American Petroleum Institute reported a build in U.S. crude stockpiles.

The euro held close to a five-month high reached in the previous session after Germany’s parliament approved plans for a significant increase in defense and infrastructure spending.

China’s Shanghai Composite Index finished marginally lower at 3,426.43 amid reports banks are slashing rates on consumer loans to record rates following efforts by policymakers to stabilize growth and counter U.S. tariffs.

Hong Kong’s Hang Seng Index inched up 0.1 percent to 24,771.14 after a volatile session. Xpeng shares slumped 5.8 percent after the electric vehicle maker’s fourth-quarter results fell short of what analysts had expected. Tech firm Xiaomi rose 1 percent after raising its EV sales target.

Japanese markets ended slightly lower and the yen eased against the dollar as the Bank of Japan left rates steady and signaled concern about the impact of trade tensions on the global economy.

Investors also digested mixed economic readings, with Japanese exports rising for a fifth straight month in February, while machinery orders dropped more than expected in January.

The Nikkei 225 Index dipped 0.3 percent to 37,751.88, while the broader Topix Index settled 0.5 percent higher at 2,795.96.

Seoul stocks rose notably, driven by big-cap tech and steel shares. The Kospi climbed 0.6 percent to 2,628.62, extending its winning streak to a third straight session on expectations of a recovery in the semiconductor sector.

Australian markets ended lower to snap a three-day winning streak. The benchmark S&P/ASX 200 Index fell 0.4 percent to 7,828.30, with utilities and real estate stocks leading losses. The broader All Ordinaries Index closed 0.4 percent lower at 8,055.30.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index slipped 0.3 percent to 12,045.93.

Europe

European stocks were subdued on Wednesday after rising in the previous session on Germany’s approval for a massive spending surge.

Bond yields dipped marginally as traders await the Federal Reserve’s interest rate decision, the post-meeting statement, updated economic projections and Fed Chair Jerome Powell’s comments for greater clarity on how proposed U.S. tariffs may impact prices and activity.

Global ratings agency Fitch has lowered its global growth forecast and warned that U.S. President Donald Trump’s reciprocal tariffs will push up inflation and delay Fed rate cuts.

Meanwhile, amid economic headwinds both at home and abroad, the Bank of England is widely expected to hold interest rates when it meets on Thursday.

While the French CAC 40 Index is up by 0.2 percent, the U.K.’s FTSE 100 Index is down by 0.2 percent and the German DAX Index is down by 0.7 percent.

Rio Tinto has moved to the downside. The mining major has urged shareholders to vote against London-based hedge fund Palliser Capital’s resolution to review the firm’s two listings in London and Sydney.

Ferrexpo has plunged. The company said it has formally notified Ukraine of potential claims under international investment agreements.

Essentra, a global provider of essential components and solutions, has also declined after full-year results showed a decline in organic growth.

Traton has also tumbled after its parent Volkswagen said it had sold a 2.2 percent stake in the truck maker for 360 million euros ($393 million).

U.S. Economic News

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended March 14th. Crude oil inventories are expected to increase by 1.2 million barrels after rising by 1.4 million barrels in the previous week.

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