Wall Street On Pins And Needles As Market Braces For Fed's Decision: Analyst Says Size And Speed Of Rate Cuts Will 'Frustrate Investors'

The market appears poised for further gains on Wednesday, building on the strength of the S&P 500 and Nasdaq Composite, which hit record highs in the previous session.

Index futures are trading modestly higher in early pre-market trading. However, the sustainability of these gains and potential for further upside hinges largely on two key events: the upcoming inflation report due before the market opens and the Federal Reserve‘s June rate decision, along with commentary regarding the near-term interest rate trajectory. Investors will be hanging on to every word from Fed Chair Jerome Powell when he hosts the post-meeting press conference shortly after the rate decision.

Positive sentiment generated by Oracle Corp.’s ORCL earnings may also provide support for tech stocks. While bond yields remained subdued, commodities prices firmed up.

Cues From Previous Session:

Stocks closed Tuesday’s session on a mixed note as tech strength mitigated jitters about the Fed’s rate decision. Apple, Inc. AAPL led the tech charge, in apparently a late reaction to its Worldwide Developers Conference keynote. The Nasdaq Composite spent the better part of the session in positive territory before ending moderately higher, while the S&P 500 Index languished in the red before making a comeback in late trading.

Both the averages hit intraday and closing records.

On the other hand, the Dow Jones Industrial Average and the small-cap-focused Russell 2,000 Index had a weak outing on Tuesday.

Commenting on the market move, fund manager Louis Navellier said, “Tech has become the safe ground for growth, and the early beneficiaries of the ongoing AI rollout.”

Insights From Analysts:

Ahead of the Fed decision, Jeffrey Roach, chief economist at LPL Financial, said, “Market participants believe the Fed is committed to conquering inflation, which partially explains the range-bound yield on the 10-year treasury.” The Fed’s job is made tougher because of the less interest-rate sensitive economy, he said.

“Inflation is cooling and the Fed should be in a position to begin their rate-cutting cycle this year, although the magnitude and speed of cuts will continue to frustrate investors,” the economist said.

Upcoming Economic Data:

The Bureau of Labor Statistics is scheduled to release its May consumer price inflation report at 8:30 a.m. EDT. The key numbers to watch for are:

The Fed will announce its interest rate verdict at 2 p.m. EDT via the post-meeting policy statement. The central bank will also release the Summary of Economic Projections, which comprises the all-import dot-plot chart — a projection of rate expectations of the members of the Federal Open Market Committee.

Fed Chair Powell will host a press conference at 2:30 p.m. EDT to explain the rate decision and offer commentary on the rate outlook.

The U.S. Treasury will release its monthly budget statement for May at 2 p.m. EDT.

See Also: How To Trade Futures

Stocks In Focus:

• Oracle climbed 8.60% in premarket trading in reaction to the company’s quarterly results.
• Casey’s General Stores, Inc. CASY rose over 5.50% following its earnings announcement.
• Broadcom Inc. AVGO, Dave & Buster’s Entertainment, Inc. PLAY and Oxford Industries, Inc. OXM are among the companies due to release their quarterly results after the market close.

Commodities, Bonds And Global Equity Markets:

Crude oil and gold futures rose ahead of the Fed decision, potentially factoring in a dovish tone from the Fed. The yield on the 10-year note remained unchanged at 4.402%.

Bitcoin BTC/USD climbed more than a percent and was striving to break above the $68K level.

Most Asian markets retreated as traders moved to the sidelines ahead of the U.S. Fed decision, although the Chinese, South Korean, Taiwanese, and Indian markets gained ground. The European market recovered from a three-session sell-off.

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Photo: Federalreserve/Flickr Photo: Bylolo/Unsplash