Stock futures gained Wednesday morning to shake off some losses after a couple of volatile session on Wall Street. Investors looked to the Federal Reserve’s latest statement and press conference to remove some uncertainty on the outlook for monetary policy.
Contracts on the S&P 500 gained more than 1% in early trading. The index closed lower for a fifth time in six sessions on Tuesday, extending volatility after Monday’s rollercoaster trading day. Contracts on the Nasdaq gained about 2% in early trading.
Microsoft (MSFT) shares reversed overnight losses and rose Wednesday morning after the company delivered better-than-expected fiscal second-quarter revenue and earnings. Shares of chipmaker Texas Instruments (TXN) also gained after offering a better-than-expected outlook for current-quarter sales despite concerns over ongoing semiconductor shortages. Companies including Tesla (TSLA) and Intel (INTC) are poised to report results on Wednesday.
For markets, the Federal Reserve’s latest monetary policy statement and press conference from Fed Chair Jerome Powell later in the day will be the banner event. Investors have been pricing in a more aggressively hawkish central bank as the Fed works to rein in inflation currently running at a four-decade high. Over the past couple months, the Fed has signaled through its December meeting minutes and in public remarks that it will likely begin raising interest rates from current near-zero levels in March. It is also considering beginning to roll assets off its balance sheet after amassing some $9 trillion in its bond portfolio.
“If you think about what’s happened in the markets, it indicates the degree of sensitivity market participants have to what is going to be the new rate environment and the new liquidity environment,” David Bailin, Citi chief investment officer and head of Citi global wealth management, told Yahoo Finance Live on Tuesday.
“The Fed made a major reversal about five weeks ago when it said that it was both going to raise rates and also consider quantitative tightening, which effectively means that you and I are going to have to finance the debt that is necessary issued by the Treasury instead of the Fed,” he added. “So with all of that, I think they’re going to look at what happened [in markets] and they’re going to say, our goal here is not to shut the economy and to make things slow. The goal here is to signal their willingness to fight inflation to the extent that they can.”
Other strategists agreed that the Fed’s recent, more hawkish tilt has left investors so far with more questions than answers. While the Fed’s December projections suggested policymakers were likely to raise rates three times this year, many market participants have now priced in expectations for four hikes, while others have suggested as many as five or six hikes may be on the table given the current inflationary backdrop. And though Powell has suggested the Fed would continue contemplating quantitative tightening, the central bank has yet to offer a concrete timeline for the start of this process.
“We are in a period of heightened uncertainty,” John Bellows, Western Asset portfolio manager, told Yahoo Finance on Tuesday. “The market’s trying to figure out where that pivot ends, what eventually anchors Fed policy going. forward and it’s still trying to calibrate correctly the scale and magnitude of that Fed pivot.”
7:23 a.m. ET Wednesday: Stock futures add to earlier losses
Here’s where markets were trading Wednesday morning before the opening bell:
S&P 500 futures (ES=F): +62.75 points (+1.44%), to 4,411.75
Dow futures (YM=F): +371 points (+1.09%), to 34,556.00
Nasdaq futures (NQ=F): +278.75 points (+1.97%) to 14,419.5
Crude (CL=F): +$0.69 (+0.81%) to $86.29 a barrel
Gold (GC=F): -$8.40 (-0.45%) to $1,844.10 per ounce
10-year Treasury (^TNX): +0.5 bps to yield 1.79%
6:15 p.m. ET Tuesday: Stock futures add to earlier losses
Here’s where futures began trading Tuesday evening:
S&P 500 futures (ES=F): -31 points (-0.71%), to 4,318.00
Dow futures (YM=F): -164 points (-0.48%), to 34,021.00
Nasdaq futures (NQ=F): -156.50 points (-1.11%) to 13,984.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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