Dow Futures Rise Ahead of Fed Decision, Bitcoin Slides—and What Else Is Happening in the Stock Market Today

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All eyes are on the Federal Reserve and Jerome Powell, the chair of the central bank.

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Stocks edged higher Wednesday, as investors looked ahead to a decision on monetary policy from the Federal Reserve.

Futures for the Dow Jones Industrial Average rose 160 points, or 0.5%, after the index retreated 151 points on Tuesday to cap its worst five-day stretch since March 2020. S&P 500 futures signaled a start 0.6% higher with the tech stock-heavy Nasdaq poised to gain 0.7%.

Overseas, the pan-European Stoxx 600 rose 0.4% after the European Central Bank announced an emergency meeting amid the current turbulent market conditions. Tokyo’s Nikkei 225 lost 1.1%.

A Wednesday afternoon decision from the Fed on monetary policy looms large, including the prospect of a supersize interest-rate hike. Facing the highest inflation in 40 years, the central bank is under pressure to act aggressively to get rising prices—which have yet to show substantial signs of peaking—under control. The risk is that the Fed can’t engineer a “soft landing” of cooling inflation without causing a recession.

“Financial markets have been beset with shivers of anticipation of more aggressive interest-rate moves, and as the clock ticks down to the key Federal Reserve meeting later, nerves are set to stay frayed,” wrote Susannah Streeter, an analyst at broker Hargreaves Lansdown .

The Fed has already raised rates twice this year, including a sizable 50 basis-point increase last month; the typical interest-rate increase is 25 basis points, or one-quarter of a percentage point. Since last week’s red-hot consumer price index data, futures markets have been increasingly pricing in the chance that the Fed aims for a mega rate hike of 76 basis points.

“Expectations have risen that policy makers at the U.S. central bank will slam on the brakes hard with a 0.75% hike, to stop prices spiraling out of control,” Streeter wrote. “The worry persists that a more aggressive attitude by the Federal Reserve will see growth go into reverse and could set off a slow motion crash into recession, with troublesome repercussions for global growth.”

In the cryptocurrency space, declines continued for Bitcoin and its peers. Bitcoin, the largest digital asset lost 10% over the past 24 hours to $20,500, flirting with the psychologically-important $20,000 level.

Exacerbating declines in the crypto space have been major liquidations of leveraged positions in the crypto futures market. Positions on margin can be sold in the blink of an eye if the value of the collateral—often Bitcoin—falls below a required level. More than 100,000 traders with positions worth some $270 million have been wiped out in the past 24 hours, according to data from Coinglass.

Write to Jack Denton at jack.denton@dowjones.com