Stock futures were little changed on Tuesday evening as traders awaited the Federal Reserve’s latest monetary policy decision and economic outlook update on Wednesday.
Contracts on the S&P 500 drifted flat to edge lower. Earlier, the index closed more than 2% higher, gaining for the first time in four sessions as volatility gripped U.S. stocks. The Nasdaq Composite also snapped a three-game losing streak to finish nearly 3% higher.
Energy prices reversed the most recent gains and West Texas Midsize Crude Oil futures settled down more than 6% to $96.44 a barrel during the settlement Tuesday afternoon. This has sent U.S. crude oil into a bear market, with prices down more than 20% from the recent closing high a week ago. Brent crude, the international standard, fell below $100 a barrel for the first time in more than two weeks.
This week, investors are bracing for the Federal Reserve’s latest monetary policy decision on Wednesday afternoon, which is expected to show the first of multiple interest rate hikes this year. Currently, the benchmark interest rate has been kept close to zero since mid-2020, with the central bank using low rates and a range of other monetary policy tools to keep financial conditions functioning smoothly amid the pandemic. . The Fed last raised interest rates in 2018.
Already, Fed Chairman Jerome Powell has told Congress in recent weeks that he would support a 25 basis point interest rate hike. Such an increase would be consistent with the usual size of the Fed’s hike per meeting over the past two decades and begin the process of tightening financial conditions to gradually lower demand and inflation while avoiding a market shock. already reeling from the Russian invasion of Ukraine.
Crucially, in addition to issuing a decision on the rate hike, the Fed will also release an updated summary of economic projections, or “dot chart,” showing central bank officials’ thinking on where the Fed might be headed. interest rates and economic growth this year. year. And to that end, many pundits expect the Fed to revise its outlook for inflation and the labor market upwards this year.
Core personal consumption expenditure (PCE) — or the Fed’s preferred gauge of inflation excluding volatile food and energy prices — last rose at an annual rate of 6.1% in January . And since then, more recent releases on consumer and producer price inflation have pointed to an even steeper rise in prices.
“The dot chart should go up given all the news we’ve had between December and today,” Michael Kushma, chief investment officer of Morgan Stanley Investment Management, told Yahoo Finance Live on Tuesday. “We have a strong labor market, inflation higher than expected. Oil prices, energy prices, commodity prices are much higher today than they were in the past. All of this suggests that the Fed needs to go and so I think they’ll be talking about the average, maybe five rate hikes in 2022 and a few more in 2023.”
6:13 p.m. ET Tuesday: Stock futures mixed, Dow futures gain more than 250 points
Here’s where the shares were trading Monday morning:
S&P 500 Futures Contracts (ES=F): -3.5 points (-0.08%) at 4,258.50
Dow futures (JM=F): -22 points (-0.07%) to 33,510.00
Nasdaq futures contracts (NQ=F): -1.5 points (-0.01%) to 13,450.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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