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U.S. equity futures moved lower Tuesday, while Treasury yields and the dollar held steady, as investors adopted a defensive tone across global markets heading into the start of the Federal Reserve’s two day policy meeting in Washington.
Stocks ended higher on Monday, with the S&P 500 notching its twenty-sixth record high close, powered in part by megacap tech gains, following an uneven session that suggested a fair amount of investor caution heading into tomorrow’s Fed rate decision.
The central bank is also set to publish fresh growth and inflation forecasts alongside its policy statement, with investors expecting a sharp reduction in the number of rate cuts Fed officials expect between now and the end of the year.
“The Fed will likely hold its forward guidance largely unchanged,” said Bill Adams, chief economist for Comerica Bank in Dallas.
“On the one hand, the Fed would not hesitate to raise rates further if they assess that interest rates need to be higher to control inflation,” he said. “On the other hand, most Fed policymakers think rates are already high enough to keep inflation headed lower, and expect it to cool later this year and open the door to interest rate cuts.”
The looming Fed decision is likely to keep a cap on sentiment throughout today’s session, especially with a key May inflation report expected prior to the start of trading tomorrow.
Benchmark 10-year Treasury note yields were little-changed at 4.454% heading into the start of the New York trading session, with 2-year notes pegged at 4.847%.
The U.S. dollar index, which tracks the greenback against a basket of global currency peers, was marked 0.04% higher at 105.191.
Markets are focused on tomorrow’s Fed rate decision, as well as a key reading of May CPI inflation.
On Wall Street, stocks are set for a muted open, but recent trading patterns suggest the likelihood of larger upside moves during the trading day, with the VIX index of market volatility marked 6.9% higher at $13.06.
Futures contracts tied to th3 S&P 500 suggest a 10 point opening bell gain while those linked to the Dow Jones Industrial Average suggest a 130 point pullback. The Nasdaq is called 45 points lower.
Stocks on the move include Apple (AAPL) , which was marked 0.42% lower following yesterday’s AI launch event that unveiled a series of new tools and a tie-up with Microsoft (MSFT) backed ChatGPT.
Eli Lily (LLY) shares, meanwhile, jumped 2.9% after an independent panel of advisors to the U.S. Food & Drug Administration recommended approval of its Alzheimer’s treatment known as donanemab.
Oracle (ORCL) shares slipped 0.16% lower ahead of the cloud computing group’s fourth quarter earnings, slated for after the closing bell, with investors looking for a bottom line of $1.65 per share on revenues of $14.59 billion.
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In Europe, the region-wide Stoxx 600 traded firmly in the red for a second consecutive session, and was last marked 0.51% lower in Frankfurt, amid the fallout from weekend parliamentary elections and French President Emmanuel Macron’s decision to call a snap vote slated for June 30.
Overnight in Asia, a weaker yen and stronger tech stocks helped lift the Nikkei 225 0.25% higher in Tokyo, while the regional MSCI ex-Japan benchmark fell 0.63% into the close of trading.
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