Stock futures are struggling for traction ahead of the Fed’s decision and after Putin escalated the war

US stock futures struggled for direction on Wednesday ahead of another expected sharp rate hike by the Federal Reserve and after Russian President Vladimir Putin escalated his war on Ukraine.

How are stock index futures traded?
  • S&P 500 Futures ES00,
    rose 5 points, or 0.1%, to 3878

  • Dow Jones Industrial Average Futures YM00,
    up 36 points, or 0.1%, to 30838

  • Nasdaq 100 Futures NQ00,
    rose just 7 points, or 0.1%, to 11929

On Tuesday, the Dow Jones Industrial Average DJIA,
down 313 points or 1.01% to 30706, the S&P 500 SPX,
down 44 points or 1.13% to 3856 and the Nasdaq Composite COMP,
fell 110 points or 0.95% to 11425.

What moves the markets

Stocks were on track for a muted opening on Wall Street as traders expressed nervousness about tightening monetary policy and rising geopolitical tensions in Europe.

“Equities markets are proving very difficult to make any headway this week amid the prospect of massive official rate hikes,” wrote Ian Williams, strategist at Peel Hunt.

The Federal Reserve is expected to hike interest rates by 75 basis points to a target range of 3.0% to 3.25% when it announces its decision at 2 p.m. ET. The central bank quickly raised borrowing costs from zero earlier in the year to combat inflation, which currently stands at 8.3%, close to multi-decade highs.

“All eyes today will be on the Federal Reserve’s latest move to combat inflation as spiraling prices continue to cause financial pain to consumers and businesses… There are concerns that inflation is perilously entrenching the economy and threatening financial stability,” it wrote Susannah Streeter Senior Investment and Markets Analyst at Hargreaves Lansdown.

The sharp rise in interest rates in recent months – and the prospect of more to come – has triggered a sell-off in bonds, pushing benchmark government bond yields down to TMUBMUSD10Y.
to 11-year highs, a move that continues to weigh on stocks in part because it makes debt relatively more attractive. The S&P 500 is down 19.1% so far in 2022.

The Fed’s expected move comes after Sweden’s central bank announced a stronger-than-expected 100 basis point rate hike on Tuesday and ahead of an expected Bank of England rate hike on Thursday.

“Central banks are showing greater determination to fight inflation and are increasingly willing to sacrifice growth to do so,” said Nathan Sheets, Citi’s chief global economist.

Jim Cramer argued in a tweet that making Fed Chair Jay Powell available meant nothing other than maintaining his previously hawkish tone then the market could recover.

However, oppressive sentiment on Wednesday was news that Russian President Vladimir Putin had called for the country’s partial military mobilization to continue his assault on Ukraine. The announcement, which also contained threats against the West, raised fears of a further escalation of the conflict.

In response, energy prices surged with US WTI crude oil futures CL.1,
up 2.5% to $86.56 a barrel and the ICE Dutch TTF natural gas futures, the continent’s benchmark, by 6.3% to 206.6 euros per megawatt hour. the euro EURUSD,
fell 0.7% to $0.9904, pushing the dollar index back near its 20-year high.

The CBOE Vix Index VIX,
an options-derived measure of expected volatility for the S&P 500, rose 1.4% to 27.6, indicating heightened nervousness among traders. Stock futures are struggling for traction ahead of the Fed’s decision and after Putin escalated the war

Brian Lowry

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