Dow Futures Up 125 Pts; Fed Rate Decision Firmly in Focus

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© Reuters Dow Futures Up 125 Pts; Fed Rate Decision Firmly in Focus

By Peter Nurse — U.S. stocks are seen edging higher at the open Wednesday, regaining some lost ground ahead of expected aggressive monetary tightening by the Federal Reserve to tame surging inflation.

At 7 AM ET (1100 GMT), the Dow Futures contract was up 125 points, or 0.4%, S&P 500 Futures traded 17 points, or 0.5%, higher and Nasdaq 100 Futures climbed 70 points, or 0.6%.

Friday’s red-hot consumer inflation report has lifted expectations that the U.S. central bank will raise its benchmark rate by three-quarters of one point, which would be its biggest hike since 1994.

Media reports that the policymakers were considering this highly aggressive move, more than the 50 basis point hike policymakers signaled in May, added to the belief.

The main indices on Wall Street have been pressured as a result, with the blue-chip Dow Jones Industrial Average closing 150 points, or 0.5%, lower Tuesday, falling for its fifth consecutive session. The broad-based S&P 500 fell 0.4%, also its fifth losing day in a row as it dropped deeper into bear market territory, while the tech-heavy Nasdaq Composite actually gained 0.2%.

The Fed will announce a decision and publish fresh growth and inflation forecasts at 2 PM ET (1800 GMT), and Chairman Jerome Powell will hold a press conference 30 minutes later.

“While a 75bp move is not certain, we doubt such potential ‘leaks’ to the media are a coincidence, and they do appear to us as a (successful) attempt to adjust expectations during the blackout period and prepare markets for the larger increase,” said analysts at ING, in a note.

Ahead of the Fed statement comes the release of U.S. retail sales for May, at 8:30 AM ET, which could provide further evidence of a shift in discretionary spending as consumers have to cope with rising prices for food and fuel.

Analysts expect a monthly increase of 0.2% in May, compared with April’s 0.9% climb, while core retail sales, which excludes food and fuel, are seen climbing 0.8% on the month.

In corporate news, Netflix (NASDAQ:NFLX) will be in the spotlight after the streaming giant announced plans to turn its most watched series “Squid Game” into a reality show with a huge cash prize.

Baidu (NASDAQ:BIDU) could also be in focus after Reuters reported that China’s internet search engine giant is in talks to sell its controlling stake in iQIYI (NASDAQ:IQ), in a deal that could value the whole of the online video platform at about $7 billion.

Oil prices headed lower Wednesday, consolidating ahead of the Fed decision despite the International Energy Agency warning that crude demand is likely to stay ahead of supply growth next year given a possible prolonged fall in Russian output.

The weekly crude inventory numbers from the U.S. Energy Information Administration are due later in the session, a day after the American Petroleum Institute reported a small rise in crude stockpiles.

By 7 AM ET, U.S. crude futures traded 1.4% lower at $117.30 a barrel, while the Brent contract fell 1.3% to $119.64.

Additionally, gold futures rose 0.8% to $1,827.30/oz, while EUR/USD traded 0.7% higher at 1.0486.