Futures Pointing To Flat Open On Wall Street Ahead Of Fed Decision

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 a strong start to the week.

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

While the Fed is widely expected to leave interest rates unchanged, traders will pay close attention to the accompanying statement for clues about the outlook for rates.

CME Group’s FedWatch Tool is currently indicating a 90.8 percent chance the Fed will leave rates unchanged today but a 57.8 percent chance of another quarter point rate hike in July.

Potentially generating some optimism about the outlook for rates, the Labor Department released a report showing producer prices in the U.S. decreased by more than expected in the month of May.

The Labor Department said its producer price index for final demand fell by 0.3 percent in May after inching up by 0.2 percent in April. Economists had expected producer prices to edge down by 0.1 percent.

The report also showed the annual rate of producer price growth slowed to 1.1 percent in May from 2.3 percent in April. The rate of growth was expected to decelerate to 1.5 percent.

Stocks moved mostly higher during trading on Tuesday, extending the upward move seen over the course of Monday’s session. With the continued advance, the Nasdaq and the S&P 500 once again reached their best closing levels in over a year, while the Dow set a four-month closing high.

The major averages finished the day off their highs of the session but still firmly positive. The Nasdaq advanced 111.40 points or 0.8 percent to 13,573.32, the S&P 500 climbed 30.08 points or 0.7 percent to 4,369.01 and the Dow rose 145.79 points or 0.4 percent to 34,212.12.

The continued strength on Wall Street came following the release of the Labor Department’s highly anticipated report on consumer price inflation in the month of May, which showed prices edged slightly higher.

The report said the consumer price index inched up by 0.1 percent in May after climbing by 0.4 percent in April. Economists had expected prices to tick up by 0.2 percent.

Excluding food and energy prices, core consumer prices rose by 0.4 percent in May, matching the increase seen in each of the two previous months as well as economist estimates.

The Labor Department also said the annual rate of consumer price growth slowed to 4.0 percent in May from 4.9 percent in April. Economists had expected the pace of growth to slow to 4.1.

The year-over-year growth in May marked the smallest annual increase since the period ending March 2021.

The annual rate of core consumer price growth also slowed to 5.3 percent in May from 5.5 percent in April, in line with expectations.

The data added to optimism about the Federal Reserve pausing its recent interest rate increases when the central bank announces its monetary policy decision later today.

“Wall Street is becoming a little bit hopeful here that an FOMC June skip could eventually become a July pause,” said Edward Moya, senior market analyst at OANDA.

He added, “Inflation is mostly heading lower and some of the leading indicators (car wholesale prices, weakening consumer) support the argument that the disinflation process will continue.”

Steel stocks moved sharply higher after China’s central bank unexpectedly lowered a short-term lending rate, resulting in a 2.3 percent surge by the NYSE Arca Steel Index. The index reached a nearly two-month closing high.

Considerable strength was also visible among chemical stocks, driving the S&P Chemical Sector Index up by 2.2 percent to its best closing level in well over a month.

Oil service stocks also saw significant strength amid a rebound by the price of crude oil, with the Philadelphia Oil Service Index climbing by 1.7 percent.

Banking, semiconductor and airline stock also showed notable moves to the upside, reflecting broad based buying interest on Wall Street.

Commodity, Currency Markets

Crude oil futures are climbing $0.74 to $70.16 a barrel after surging $2.30 to $69.42 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,964.30, up $5.70 compared to the previous session’s close of $1,958.60. On Tuesday, gold fell $11.10.

On the currency front, the U.S. dollar is trading at 139.67 yen compared to the 140.22 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0825 compared to yesterday’s $1.0793.

Asia

Asian stocks ended mixed on Wednesday after overnight data showed U.S. consumer price inflation slowed in May, reinforcing expectations the Federal Reserve would skip a rate hike later in the day.

Expectations of more rate cuts and policy stimulus from China helped to limit overall losses to some extent.

Chinese shares fluctuated before finishing slightly lower after a World Bank report cautioned that China’s economic recovery remains fragile and depended on policy support.

The benchmark Shanghai Composite Index slipped 0.1 percent to 3,228.99, while Hong Kong’s Hang Seng Index finished 0.6 percent lower at 19,408.42.

Japanese shares led regional gains as the yen weakened on expectations that the Bank of Japan will maintain its ultra-loose policy when it meets on Friday.

The Nikkei 225 Index jumped 1.5 percent to 33,502.42, marking its highest close since March 1990 after a four-day winning streak. The broader Topix Index settled 1.3 percent higher at 2,294.53.

Toyota Motor spiked 6.3 percent to extend Tuesday’s rally after announcing a range of advancements in solid-state batteries and other technologies. Peer Honda Motor gained 3.6 percent, while SoftBank Group, Kobe Steel, Trend Micro and Sumitomo Metal Mining surged 5-6 percent.

Seoul stocks ended notably lower ahead of the Fed’s rate decision. The Kospi fell 0.7 percent to 2,619.08, with Kakao Corp., LG Energy & Solution and Samsung SDI leading losses.

Export prices in South Korea were down 1.3 percent month-on-month in May after rising 0.4 percent in April, the Bank of Korea said in a report today.

Australian markets eked out modest gains as mining stocks surged on China stimulus hopes.

The benchmark S&P/ASX 200 Index rose 0.3 percent to 7,161.70, while the broader All Ordinaries Index ended 0.3 percent higher at 7,354.20. BHP Billiton, Rio Tinto and Fortescue Metals Group jumped 3-4 percent.

Biopharmaceutical giant CSL plunged 6.9 percent after flagging headwinds from higher exchange rates in fiscal 2023.

Across the Tasman, New Zealand’s benchmark S&P/NZX 50 Index edged up 0.2 percent to 11,678.62.

The IMF warned in a report that the New Zealand economy had overheated because of the “generous” financial and monetary support and was now going through a necessary slowdown caused by the RBNZ’s rate increases to combat inflation.

Europe

European stocks have moved higher on Wednesday, with Fed pause hopes and encouraging data from Germany and the U.K. helping underpin sentiment.

Signs of moderating U.S. inflation reinforced bets the Federal Reserve would skip a rate hike later in the day.

Eurozone industrial output rose more than expected in April, helping ease concerns surrounding the economic outlook.

Industrial production rose 1.0 percent in April compared with the previous month after an upwardly revised 3.8 percent slump in March, Eurostat reported.

Elsewhere, data showed retailers and the film industry helped Britain’s economy inch higher in April as expected.

GDP grew by 0.2 percent month-on-month in April, the Office for National Statistics said, coming in line with analyst estimates.

While the French CAC 40 Index has advanced by 0.8 percent, the German DAX Index is up by 0.6 percent and the U.K.’s FTSE 100 Index is up by 0.5 percent.

Construction equipment manufacturer Wacker Neuson has jumped after saying it aims to grow revenue by 78 percent by 2030 and increase profitability.

Spanish drug maker Grifols has also soared after it announced plans to divest shares in Shanghai RAAS for estimated proceeds of $1.5 billion.

Oil & gas giant Shell has also moved higher after it announced plans to ramp up dividend and share buybacks.

German footwear conglomerate Puma has also moved to the upside. The company announced a reorganization to improve alignment across key business categories.

Meanwhile, Machinery manufacturer Heidelberger Druckmaschinen has slumped after issuing a cautious outlook for the new financial year.

Ladbrokes-owner Entain has also plunged on news it would buy Poland-based sports betting operator STS Holdings for 750 million pounds ($946 million).

Self-storage company Safestore Holdings has also fallen after its pre-tax profit declined 64 percent in the first half of fiscal 2023 despite higher revenue.

Computer accessories maker Logitech has also plummeted on news its CEO and President Bracken Darrell is leaving for another job.

U.S. Economic Reports

Producer prices in the U.S. decreased by more than expected in the month of May, according to a report released by the Labor Department on Wednesday.

The Labor Department said its producer price index for final demand fell by 0.3 percent in May after inching up by 0.2 percent in April. Economists had expected producer prices to edge down by 0.1 percent.

The report also showed the annual rate of producer price growth slowed to 1.1 percent in May from 2.3 percent in April. The rate of growth was expected to decelerate to 1.5 percent.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended June 9th.

Crude oil inventories are expected to decrease by 1.3 million barrels after edging down by 0.5 million barrels in the previous week.

The Federal Reserve is due 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.