Stock futures were slightly higher on Wednesday morning as traders look ahead to the upcoming interest rate hike announcement from the Federal Reserve.
Dow Jones Industrial Average futures rose by 42 points, or 0.14%. S&P 500 and Nasdaq 100 futures climbed 0.15% and 0.13%, respectively.
Stocks fell Tuesday on the first day of the Federal Open Market Committee’s meeting. The Dow Jones Industrial Average shed 313.45 points, or 1.01%. The S&P 500 and the Nasdaq Composite fell 1.13% and 0.95% respectively.
Yields also jumped Tuesday. The 2-year U.S. Treasury note yield surged as high as 3.99%, its highest level since 2007. The yield on the 10-year Treasury briefly touched 3.6%, the most since 2011.
Investors expect that on Wednesday, the central bank will deliver its third consecutive 0.75 percentage point rate hike to tame high inflation. A higher-than-expected consumer price index reading in August and hawkish comments on rate hikes from Fed leaders have weighed on stocks, with more pressure likely ahead as the central bank continues to fight inflation.
“We’ll never truly know whether the equity market lows are in for the year without successfully testing the June lows,” said John Lynch, chief investment officer at Comerica Wealth Management in a Tuesday note. “To be sure, the recent technical weakness in stock prices must now contend with the resolve of monetary policy makers in their fight against inflation.”
He added that third-quarter earnings season may also add headwinds for stock prices if they show further margin erosion for U.S. companies.
Investors will also be watching for earnings from Lennar, KB Homes, General Mills and Steelcase Wednesday. Existing home sales will also be released Wednesday morning.
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Fed should prioritize soft landing, says Lazard’s Temple
Even though the Federal Reserve is set to deliver its third consecutive 0.75 percentage point rate hike this week – tripling the pace of tightening – they should be careful not to throw the economy into a recession, said Ron Temple, head of U.S. Equity at Lazard Asset Management.
“Inflation is unacceptably high, and investors, politicians, and consumers are anxious, but patience is a virtue,” said Temple. “Monetary policy works with long and variable lags.”
He added that key drivers of inflation are already falling.
“The Fed should avoid the temptation to overreact to recent data and keep their eyes on the goal of achieving the softest landing possible,” he said.
Shares of Stitch Fix fell about 1.5% in post-market trading. The online styling company reported revenue losses in the fourth quarter after the bell Tuesday.
Stitch Fix reported a loss of 89 cents per share on a net revenue of $481.9 million, which is down 16% from the same period a year ago. Net revenue for the first quarter of 2023 is expected to be down approximately 20% from the same quarter a year prior, the company said in a release detailing its performance.
“Today’s macroeconomic environment and its impact on retail spending has been a challenge to navigate, but we remain committed to working through our transformation and returning to profitability,” said CEO Elizabeth Spaulding.
Full-year revenue was down 1.4% compared to the prior year.
— Alex Harring
Stock futures open flat ahead of key Fed decision
Stock futures opened flat Tuesday evening as Wall Street awaits the Federal Reserve Open Market Committee’s interest rate decision Wednesday. The central bank is expected to deliver another 0.75 percentage point interest rate hike to calm inflation.
Dow Jones Industrial Average futures rose by 20 points, or 0.06%. S&P 500 and Nasdaq 100 futures climbed 0.10% and 0.15%, respectively.