December S&P 500 futures (ESZ23) have gained +0.28%, and December Nasdaq 100 E-Mini futures (NQZ23) are up +0.32% this morning, with investors gearing up for the Federal Reserve’s imminent interest rate decision.
In Tuesday’s trading session, Wall Street’s major indices closed in the red. Walt Disney Company (NYSE:DIS) saw a decline of over -3% following its announcement of plans to nearly double capital expenditure for its parks business to $60 billion over the next decade. Starbucks Corporation (NASDAQ:SBUX) also faced a downturn, dropping more than -1% after TD Cowen downgraded the stock from Outperform to Market Perform. In addition, Rocket Lab USA, Inc. (NASDAQ:RKLB) experienced a significant setback, plummeting over -7% after encountering an issue during its 41st mission launch, which subsequently led to the postponement of the next mission. On a more positive note, Dell Technologies Inc (NYSE:DELL) recorded a gain of more than +1% after Daiwa upgraded the stock from Neutral to Outperform.
Economic data from Tuesday revealed that U.S. August Housing Starts reached their lowest level since June 2020, standing at 1.283 million, falling short of the consensus estimate of 1.440 million. Simultaneously, the U.S. Building Permits surprisingly increased to 1.543 million in August, surpassing expectations of 1.440 million.
Today, all eyes are on the U.S. Federal Reserve’s monetary policy decision. U.S. rate futures currently indicate a 99.0% likelihood that the Fed will maintain its federal funds rate range at 5.25-5.50%. Investors are eagerly awaiting the post-decision press conference by Fed Chair Jerome Powell and the release of the Fed’s Summary of Economic Projections, with particular attention on the quarterly dot plot.
Kim Forrest, chief investment officer at Bokeh Capital Partners, emphasized the importance of the Fed’s language, stating, “Markets will focus on the Fed’s language, especially what they think. We all have an opinion on what the economy is doing, but apparently what the Fed thinks about it is the most important thing, if they see signs of softening or strengthening in the economy and that will inform us what will happen in November.”
On the economic front, investors are likely to closely monitor U.S. Crude Oil Inventories data, with economists estimating a figure of -2.200 million, in contrast to last week’s value of +3.954 million.
In other news, Bank of America strategists have raised the S&P 500 year-end price target by 7% to 4600, citing factors such as increased productivity, efficiency, and reduced labor intensity as drivers of robust economic growth.
In the bond markets, United States 10-year rates currently stand at 4.350%, marking a decrease of -0.39%.
Meanwhile, Euro Stoxx 50 futures have surged +0.70% this morning, with investors digesting U.K. inflation data while awaiting the U.S. Federal Reserve’s interest rate decision. Real estate and healthcare stocks are leading the overall market higher. The Office for National Statistics reported that Britain’s inflation rate unexpectedly fell to the lowest level in 18 months due to a decline in food prices. Additionally, the probability of a quarter-point rate hike by the Bank of England on Thursday has declined, with the market now attributing a probability of less than 60%, down from the previous 90%. In corporate news, M&G Plc (MNG.LN) recorded a gain of over +2% after the insurer reported a stronger-than-expected 31% rise in its first-half operating profit.
U.K.’s CPI, U.K.’s Core CPI, and Germany’s PPI data were also released today. U.K. August CPI came in at +0.3% m/m and +6.7% y/y, falling short of expectations. U.K. August Core CPI arrived at +0.1% m/m and +6.2% y/y, while the German August PPI stood at +0.3% m/m and -12.6% y/y.
In Asian markets, stocks closed in the red, with China’s Shanghai Composite Index (SHCOMP) down -0.52% and Japan’s Nikkei 225 Stock Index (NIK) down -0.66%. Concerns about China’s economy persisted despite positive data from the previous week, and foreign investor selling weighed on sentiment. Although China maintained benchmark lending rates, Cong Liang, Vice Chairman of the National Development and Reform Commission, expressed that China’s economy still faces numerous challenges. Tourism, semiconductor, and automobile stocks underperformed, while tech giants listed in Hong Kong also experienced losses. Foreign investors sold a net 3.5 billion yuan worth of Chinese stocks through the Stock Connect program on Wednesday.
HSBC offered a note of optimism, stating, “With Asia, GEM (Global Emerging Markets), and global funds already underweight China, especially GEM funds, we believe much of the pessimism has been priced in. The good news is the market is now cheap. We also see positives from the widespread improvement in August macro data.”
Japan’s Nikkei 225 Stock Index closed lower as investors exercised caution in anticipation of crucial central bank decisions, including those from the U.S. Federal Reserve and the Bank of Japan. Resource stocks faced declines after crude oil prices retreated from 10-month highs, while shippers and other stocks with higher dividends continued to outperform. Ministry of Finance data revealed that Japan’s exports declined for the second consecutive month in August due to weakened demand for mineral fuels and semiconductor manufacturing equipment. Meanwhile, the yen stabilized following comments from U.S. Treasury Secretary Janet Yellen, who expressed understanding for any currency intervention by Japan to smooth out volatility. The Nikkei Volatility increased by +2.01% to 17.26.
Japanese August Trade Balance was reported at -930.5 billion yen, weaker than expectations. Japanese August Exports and Imports also came in slightly stronger than expected.
In the pre-market U.S. stock movers, Chewy Inc (NYSE:CHWY) faced a decline of over -2% after being downgraded by Oppenheimer from Outperform to Perform. Conversely, Steelcase Inc (NYSE:SCS) recorded a gain of more than +6% in pre-market trading after reporting better-than-expected Q2 results and providing upbeat FY24 EPS guidance. Nano Dimension Ltd (NASDAQ:NNDM) rose over +3% in pre-market trading following approval from the Israeli court to continue with its previously announced share repurchase plan. Dollar General Corporation (NYSE:DG) dropped more than -2% in pre-market trading after being downgraded by JPMorgan from Neutral to Underweight. Hudson Pacific Properties Inc (NYSE:HPP) gained over +2% in pre-market trading after BMO Capital upgraded the stock from Market Perform to Outperform.
Today’s U.S. earnings spotlight includes FedEx (NYSE:FDX), General Mills (NYSE:GIS), KB Home (NYSE:KBH), Lifezone Metals (NYSE:LZM), and Genfit (NASDAQ:GNFT).
Featured Image: Freepik @ nicedream30
Author Faith Yakubu 
