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

Following the pullback seen last Friday, stocks may show a lack of direction in early trading on Monday. The major index futures are currently pointing to a roughly flat open for the markets, with the Dow futures up by just 11 points.

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

Recent turmoil in the banking sector has led to some optimism the Fed will hold off on raising interest rates following the two-day meeting.

CME Group’s FedWatch Tool is currently indicating a 34.3 percent chance the Fed will leave rates unchanged and a 65.7 percent chance of a 25 basis point rate hike.

However, concerns about the banking sector may continue to weigh on the markets, with U.S.-listed shares of Credit Suisse (CS) seeing substantial pre-market weakness.

The nosedive by Credit Suisse comes following news of an historic state-backed rescue of the troubled lender by Swiss rival UBS Group.

Shares of First Republic (FRC) are also moving sharply lower in pre-market trading after Standard & Poor’s lowered the bank’s credit rating once again.

On the other hand, shares of New York Community Bank (NYCB) are seeing significant pre-market strength after the bank agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal.

After moving sharply higher over the course of Thursday’s session, stocks saw a significant pullback during trading on Friday. The major averages all showed notable moves to the downside on the day, with the Nasdaq snapping a four-day winning streak.

The major averages finished the session off their worst levels but still firmly negative. The Dow tumbled 384.57 points or 1.2 percent to 31,861.98, the Nasdaq slid 86.76 points or 0.7 percent to 11,630.51 and the S&P 500 slumped 43.64 points or 1.1 percent to 3,916.64.

For the week, the Nasdaq soared by 4.4 percent and the S&P 500 jumped by 1.4 percent, but the narrower Dow edged down by 0.2 percent.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan’s Nikkei 225 Index dove by 1.4 percent, while Hong Kong’s Hang Seng Index plunged by 2.7 percent.

Meanwhile, the major European markets have moved to the upside over the course of the session. While the French CAC 40 Index has advanced by 0.7 percent, the German DAX Index is up by 0.5 percent and the U.K.’s FTSE 100 Index is up by 0.3 percent.

In commodities trading, crude oil futures are falling $0.62 to $66.12 a barrel after tumbling $1.61 to $66.74 a barrel last Friday. Meanwhile, after soaring $50.50 to $1,973.50 an ounce in the previous session, gold futures are climbing $16 to $1,989.50 an ounce.

On the currency front, the U.S. dollar is trading at 131.37 yen versus the 131.85 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0712 compared to last Friday’s $1.0670.

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