US stock futures are trending south ahead of Fed minutes

US stock index futures pointed to a weaker start for Wall Street as investors waited for more guidance on interest rate policy when minutes of the Federal Open Market Committee meeting in early May are released later in the meeting.

How are stock futures traded?
  • S&P 500 Futures ES00,
    declined 0.3% to 3,927

  • Dow Jones Industrial Average Futures YM00,
    fell 0.3% to 31,775

  • Nasdaq 100 Futures NQ00,
    slipped 0.3% to 11,735

On Tuesday, the Dow Industrials DJIA,
rose 0.2% to 31,928.62, its third straight gain. The S&P 500 SPX,
down 0.8% to 3,941.48 for two straight days of gains, while the Nasdaq Composite COMP,
fell 2.4% to 11,264.45, the lowest close since November 3, 2020.

What moves the markets?

Investors are concerned that economic growth will slow quickly amid tighter monetary conditions as war in Ukraine and China’s Covid lockdowns worsen the outlook.

Pullback Tuesday came after a dire warning from Snapchat parent company Snap Inc. SNAP.
this weighed on technology stocks, while weak home sales also weighed on investor sentiment.

Markets could be guided by clues to future monetary policy decisions when the Fed’s minutes from the last monetary policy meeting are released at 2:00 p.m. Eastern time.

Read: The S&P 500 is trading near the bear market. Its ferocity may depend on the economy.

“While the search for a potential 75 basis point rate hike may be futile, the base case remains a series of 50 basis point rate hikes to follow,” said a team of strategists at Saxo Bank. “But investors are also increasingly analyzing Fed talks to look for signs of stagflation or an economic slowdown, and that’s really driving market sentiment for now.”

Fed Chair Jerome Powell has laid out plans for the central bank to raise the benchmark interest rate by half a percentage point at the next two FOMC meetings in June and July, bringing it to almost 2% by August.

Read: Fed’s Bostic calls for caution as Fed hikes rates: ‘Even fire engines with sirens wailing slow down at intersections’

In economic data, US factory orders for durable goods such as machinery and electronics rose 0.4% in April, suggesting the economy was still growing at a steady pace at the start of spring. Economists polled by the Wall Street Journal had forecast a 0.7% rise.

Chip maker Nvidia Corp.’s profits are on Wednesday. NVDA in focus.
and cloud-computing-based data warehousing group Snowflake Inc. SNOW,
“The concern for Nvidia is to what extent the decline in cryptocurrencies due to a slowdown in crypto mining is starting to weigh on sales,” Saxo strategists said.

“Snowflake has been one of the hottest IPOs in recent memory, even attracting Berkshire Hathaway as one of its investors, and revenue growth has been strong, but the market is becoming increasingly nervous that growth is slowing faster than originally expected,” they added.

Read: Here’s what the US head of KPMG says about the market downturn, the economy and M&A

Wendy’s Co. WEN stock,
is up 10% premarket after Nelson Peltz’s hedge fund Trian announced plans for a potential sale of the burger chain.

Which companies are in focus?
  • shares of Dick’s Sporting Goods Inc.
    Plunged 15% in premarket trading on Wednesday after the sporting goods and apparel retailer reported first-quarter results that beat expectations but lowered its full-year outlook.

  • express inc shares EXPR,
    Soared 12% in premarket trading on Wednesday, after the clothing retailer announced a smaller-than-expected first-quarter loss and a better-than-consensus forecast.

  • Wendy’s
    rallied in premarket action after longtime shareholder Trian Fund Management said it was exploring a takeover or other potential deal for the restaurant chain. Trian is the company’s largest shareholder with a 19.4% stake.

  • north current
    rose in the pre-market after the retailer raised its full-year sales and profit guidance late Tuesday.

How are other assets traded?
  • The yield of the 10-year Treasury note TMUBMUSD10Y,
    fell 2 basis points to 2.739% as investors sought safety in government bonds. Yields and treasury prices move in opposite directions.

  • The ICE Dollar Index DXY,
    which measures the greenback against major currencies rose 0.5%.

  • For oil futures CL.1,
    West Texas Intermediate crude for July delivery CLN22,
    rose 1.2% to $111.12 a barrel. Gold for June delivery GCM22,
    fell 0.6% to $1,854.30 an ounce.

  • bitcoin BTCUSD,
    rose 0.8% to $29,406.

  • For European stocks of the Stoxx Europe 600 SXXP,
    up 0.2%, while London’s FTSE 100 UKX,
    0.3% higher.

  • In Asia, the Shanghai Composite SHCOMP,
    finished 1.2% higher as Hong Kong’s Hang Seng Index HSI,
    rose 0.3% and Japan’s Nikkei 225 Index NIK,
    down 0.3%. US stock futures are trending south ahead of Fed minutes

Brian Lowry

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