US Stocks Likely To Open Higher Ahead Of Fed's Verdict On Interest Rates: 'A Short Bout Of Stagflation Is Likely,' Says Expert

U.S. stock futures rose on Wednesday after two days of decline on Tuesday. Futures of major benchmark indices were higher in premarket.

The upmove comes after the U.S. and China agreed to hold high-level trade talks in Switzerland this weekend, their first major meeting since President Donald Trump initiated the trade war, amid growing U.S. market concerns over tariff impacts.

Investors will await the Federal Reserve’s decision on interest rates, which is slated to be announced by Fed Chair Jerome Powell today afternoon.

Meanwhile, the 10-year Treasury bond yielded 4.32% and the two-year bond was at 3.80%. The CME Group's FedWatch tool‘s projections show markets pricing a 95.6% likelihood of the Federal Reserve keeping the current interest rates unchanged in its May meeting.

The SPDR S&P 500 ETF Trust SPY and Invesco QQQ Trust ETF QQQ, which track the S&P 500 index and Nasdaq 100 index, respectively, fell in premarket on Wednesday. The SPY was down 0.63% to $562.30, while the QQQ declined 0.65% to $484.55, according to Benzinga Pro data.

Cues From Last Session:

Only utilities and energy sectors advanced on Tuesday, while health care, industrials, and consumer discretionary sectors led the declines.

Fueled by businesses and consumers rushing to import goods before President Trump’s sweeping tariffs took effect, the U.S. trade deficit ballooned to a record $140.5 billion in March, according to the data released on Tuesday. Federal data revealed significant stockpiling, particularly of pharmaceuticals.

It approximately doubled from $68.6 billion in March 2024.

After Tuesday, the S&P 500 index was out of the correction zone, just down 8.79% from its record high of 6,147.43 points, scaled on Feb. 19. Dow Jones was 9.42% lower than its 52-week high of 45,073.63 points, and Nasdaq 100 was 10.94% lower than its previous high of 22,222.61 points.

Insights From Analysts:

Ed Yaderni from Yardeni Research wrote in his QuickTakes memo that “A short bout of stagflation is likely.”

“We reckoned that the economy would remain resilient. We still think so, but Trump’s Tariff Turmoil (TTT) is stress-testing the resilience of the economy. It will probably slow economic growth and boost inflation. A short bout of stagflation is likely,” he added.

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Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research, said that the AI-led optimism was booming again despite tariff woes.

“The sentiment around the AI secular growth story feels like it’s been resurrected, and the market seems more sanguine around companies’ ability to navigate the potential impact of tariffs,” he said.

According to Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research, “The Fed will likely try to signal they are on hold for the time being and want to wait for more clarity about how tariffs will or won't impact the economy,” said “The market's projecting three cuts this year, which has been pared back from earlier expectations.”

Upcoming Economic Data

Here’s what investors will keep an eye on Wednesday:

• The FOMC meeting will begin at 2:00 p.m., and Fed Chairman Jerome Powell will deliver the verdict at a press conference at 2:30 p.m. ET.

• Consumer credit for March will be out by 3:00 p.m. ET.

Stocks In Focus:

• Walt Disney Co. DIS rose 0.87% in premarket on Wednesday as it is expected to report earnings before the opening bell. Analysts expect a quarterly earnings of $1.20 per share on revenue of $23.14 billion.
• Uber Technologies Inc. UBER was up 0.54% as Wall Street expects it to report earnings of 50 cents per share on revenue of $11.62 billion before the opening bell.
• Owens Corning OC was 0.021% below the flatline ahead of its earnings before the opening bell. Analysts expect a quarterly earnings of $2.87 per share on revenue of $2.51 billion.
• Johnson Controls International PLC JCI was 0.35% higher as Wall Street expects it to report earnings of 80 cents per share on revenue of $5.66 billion before the opening bell.
• Advanced Micro Devices Inc. AMD rose 2.43% as it reported stronger-than-expected first-quarter financial results Tuesday after the bell. AMD said it expects second-quarter revenue of approximately $7.4 billion, plus or minus $300 million. Analysts are currently forecasting second-quarter revenue of $7.24 billion.
• Arista Networks Inc. ANET declined 4.37% after posting mixed first-quarter results after Tuesday's closing bell. It reported quarterly earnings of 65 cents per share, which beat the analyst consensus estimate of 60 cents. Quarterly revenue came in at $2 billion, which missed the consensus estimate of $2.02 billion.
• Corpay Inc. CPAY rose 1.44% after AvidXchange agreed to be acquired by TPG in partnership with Corpay for $2.2 billion.
• TPG Inc. TPG jumped 4.96% as it announced the acquisition of Acquire Peppertree Capital Management.
• Marvell Technology Inc. MRVL dropped 4.21% after it postponed its investor day, citing the macroeconomic environment.

Commodities, Gold, And Global Equity Markets:

Crude oil futures were trading higher in the early New York session by 0.80% to hover around $59.56 per barrel.

Gold Spot US Dollar fell 1.59% to hover around $3,376.07 per ounce. Its last record high stood at $3,500.33 per ounce. The U.S. Dollar Index spot was higher by 0.28% at the 99.5120 level.

Asian markets ended higher on Monday except Japan's Nikkei 225. India's S&P BSE Sensex, Australia's ASX 200, China’s CSI 300, Hong Kong's Hang Seng, and South Korea's Kospi index rose. European markets were falling in early trade.

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