US Stock Futures Stall As Traders Await Fed Chair Powell's Decision; Analyst Sees S&P 500 Showing 'Signs Of Near-Term Top'

Investors remain cautious ahead of the Federal Reserve‘s interest rate decision, with stock futures on Wednesday hinting at a lower opening. Trading is expected to be subdued, mirroring the historical pattern on Fed decision days. Stocks may stagnate until the announcement is released. If the Fed’s economic projections (dot plot) align with market expectations, a buying spree could follow.

Weakness in bond yields and gold prices suggests the market anticipates a dovish Fed stance. However, Fed Chair Jerome Powell‘s comments in the press conference following the announcement could still influence markets. Several key earnings reports are also scheduled for today, both before and after the market opens.

Cues From Previous Session:

Overcoming initial anxieties, investors pushed stocks higher on Tuesday, buoyed by the prospect of a dovish Fed decision on Wednesday. The Dow Jones Industrial Average opened strong and remained mostly positive throughout the session, closing just below its daily high.

The Nasdaq Composite and S&P 500 initially dipped but quickly reversed course, entering positive territory by early afternoon and remaining there for most of the day. The S&P 500 even closed at a new record high.

Ten of the eleven S&P 500 sectors closed higher, with only communication services experiencing profit-taking declines. Energy, consumer discretionary, and utility stocks led the gains.

Analyst Color:

Market watchers have pushed back their expectations in the wake of last week’s hotter-than-expected inflation readings. Fund manager Louis Navellier said, “In the wake of a disastrous report on February wholesale inflation where food, energy, and good prices surged, any Fed rate cut will likely be postponed until June or later.”

Comerica’s Chief Investment Officer John Lynch flagged a potential pause in equity markets in the near term, consistent with seasonal weakness typical in presidential election years. It is something to be prepared for as investors can use weakness to rebalance portfolios back toward targeted longer-term allocations, he said.

“The S&P 500 Index is exhibiting signs of a near-term top as momentum begins to moderate… A break below the February 5,050 level could bring the 50-DMA of ~4,950 into play, followed by the December 2021 – January 2022 high of 4,820,” he said.

“Considering good earnings prospects, copper's recent breakout, declining global yields, a U.S. dollar that appears to have topped, and full employment, we suspect any pullback would be in the -5.0% to -6.0% range.”

Futures Today

Futures Performance On Wednesday ( as of 7 a.m. EDT)

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY slipped 0.02% to $515.62, and the Invesco QQQ ETF QQQ edged up 0.09% to $438.97, according to Benzinga Pro data.

Upcoming Economic Data:

The Energy Information Administration is due to release its customary weekly petroleum status report at 10:30 a.m. EDT.

The Federal Open Market Committee will announce its interest rate decision after a two-day meeting. The post-meeting policy statement and the Summary of Economic Projections, which also comprises the dot-plot curve – Fed officials’ forecasts of rate trajectory, at 2 p.m. EDT. Powell will host a press conference at 2:30 p.m. EDT.

See also: Best Futures Trading Software

Stocks In Focus:

• BioNTech SE BNTX fell over 5% in premarket trading following the release of its quarterly results.
• PDD Holdings Inc. PDD rallied over 10%, while JinkoSolar Holding Co., Ltd. JKS fell over 3% on earnings.
• Nasdaq, Inc. NDAQ fell over 3% as Borse Dubai plans to sell the exchange’s stock in a secondary offering.
• Chipotle Mexican Grill, Inc. CMG rallied more than 6% following an announcement concerning a 50-for-1 stock split.
• Ollie’s Bargain Outlet Holdings, Inc. OLLI, Signet Jewelers Limited SIG and General Mills, Inc. GIS are among the notable companies reporting earnings before the market open.
• Those reporting after the close include BlackBerry Limited BB, Chewy, Inc. CHWY, Guess?, Inc. GES, Worthington Enterprises, Inc. WOR, Steelcase Inc. SCS, Five Below, Inc. FIVE, KB Home, Inc. KBH and Micron Technology, Inc. MU.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures fell nearly $1 and traded at $81.94 early during the European session on Wednesday, giving back some of the gains they made over the past two sessions. Gold futures fell modestly ahead of the Fed meeting, and the 10-year Treasury bond yield slipped modestly to 4.277%. Bitcoin BTC/USD fell modestly and traded at around $63,000.

Asian stocks ended mostly higher, although the mood was cautious amid a focus on the Fed decision, while European stocks fell in early trading.

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