US equity futures edged higher as traders awaited a Federal Reserve interest rate decision that will be scrutinized more for the policy outlook than a widely expected pause in hikes.
(Bloomberg) — US equity futures edged higher as traders awaited a Federal Reserve interest rate decision that will be scrutinized more for the policy outlook than a widely expected pause in hikes.
Contracts on the S&P 500 and the Nasdaq 100 both added about 0.3%. Among individual moves, grocery delivery company Instacart Inc. slipped in premarket, a day after surging following one of the year’s biggest US initial public offerings.
The Fed is expected to hold for the second time this year following a slowing in inflation, while leaving the door open for another increase as early as November. Wall Street will be focused on whether Fed officials’ forecasts for interest rates, the so-called dot plot, show whether they seem determined to hike again.
“While rates should remain steady, a question mark remains over the longer-term outlook,” said Richard Flynn, UK Managing Director at Charles Schwab. “Now that inflation has peaked, we are likely to see the Fed shift to a more surgical approach. There continues to be a possibility of a hike later this year as central bankers target remaining sticky areas, but one more boost is unlikely to trouble the market.”
In Europe, stocks rose and the pound weakened after British inflation slowed unexpectedly. Sterling fell as much as 0.5% against the dollar to its lowest level since May as traders bet that the Bank of England is nearing the end of its hiking cycle. UK bonds soared.
Britain’s Consumer Prices Index rose 6.7% from a year earlier in August, the slowest pace in 18 months, and less than the 7% expected by economists. The market is pricing a less than 50% chance of a quarter-point rate increase by the BOE at its meeting on Thursday, a move that was almost guaranteed earlier this week.
US Treasury yields pulled back after rates on both the five- and 10-year notes hit the highest levels since 2007 on Tuesday.
Brent crude slipped below $94 per barrel after a recent rally, with prices still near a 10-month high, providing a lingering threat of increased inflation pressures.
Goldman Sachs Group Inc. analysts raised their forecast for crude back to triple digits as worldwide demand hits unprecedented levels and OPEC+ supply curbs continue to tighten the market. The Wall Street bank pushed up its 12-month forecast for Brent to $100 a barrel from $93. However, most of the rally “is behind us,” the bank said in a note.
Meanwhile, Bank of America Corp.’s Savita Subramanian became the latest Wall Street strategist to boost her target for the S&P 500 after the sharp rally in 2023 left forecasts in the dust. The strategist now expects the benchmark to end the year at 4,600 points versus her earlier target of 4,300 — implying a gain of about 3.5% from its Tuesday close.
Indicators on the macro cycle, valuations and positioning are flashing bullish signals, she said.
Key events this week:
- Federal Reserve policy meeting followed by Fed Chair Jerome Powell’s news conference, Wednesday
- Bank of Canada issues summary of its September policy meeting, Wednesday
- Eurozone consumer confidence, Thursday
- Bank of England policy meeting, Thursday
- US leading index, initial jobless claims, existing home sales, Thursday
- China’s Bund Summit, Friday
- Japan CPI, PMIs, Friday
- Bank of Japan rate decision, Friday
- Eurozone S&P Global Eurozone PMIs, Friday
- US S&P Global Manufacturing PMI, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.3% as of 8:27 a.m. New York time
- Nasdaq 100 futures rose 0.3%
- Futures on the Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 0.8%
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0703
- The British pound fell 0.1% to $1.2375
- The Japanese yen was little changed at 147.87 per dollar
- Bitcoin fell 0.4% to $27,094.75
- Ether fell 0.9% to $1,628.3
- The yield on 10-year Treasuries declined two basis points to 4.34%
- Germany’s 10-year yield declined two basis points to 2.72%
- Britain’s 10-year yield declined eight basis points to 4.26%
- West Texas Intermediate crude fell 0.8% to $90.46 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar and Cecile Gutscher.
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