LDN - Business

Futures muted as investors await Fed rate decision, Powell comments

[March 22, 2023] By Amruta Khandekar and Shubham Batra

(Reuters) -U.S. stock index futures were subdued on Wednesday, ahead of the outcome of the Federal Reserve's rate-setting meeting in which the central bank will seek to balance inflation and banking sector concerns.

Traders have halved the size of the expected interest rate hike to 25 basis points following troubles in the banking sector, with analysts saying a pause was unlikely as it would indicate the turmoil had rattled the Fed.

The U.S. central bank's two-day policy meeting will end at 2 p.m. ET (1800 GMT), with investors keenly awaiting Fed Chair Jerome Powell's conference at 2:30 p.m. ET to gauge the central bank’s rate-hike trajectory.

"The Fed has a hard task as fears around the financial system intensify. While the central bank is likely to continue its hiking cycle with a 0.25% move, we think the guidance for future meetings will be considerably more open," said Gabriele Foà, co-portfolio manager at Algebris Investments.

"Data will take the centrestage, and the Fed will need to acknowledge good progress on inflation vs a re-prioritization of the ongoing risks."

Wall Street's main indexes notched gains in the past two straight sessions, after the rescue of Credit Suisse as well as measures by central banks to boost liquidity helped soothe some worries about risks to other banks.

However, a scramble by troubled regional U.S. lender First Republic Bank to secure a capital infusion has kept alive some fears about the banking sector.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 16, 2023. REUTERS/Brendan McDermid

Shares of First Republic edged 1.5% higher in premarket trade, with a Bloomberg News report on Tuesday stating the bank's rescue could rely on backing from the U.S. government to facilitate a deal.

Shares of its peers PacWest Bancorp and Western Alliance Bancorp were also up 0.5% and 1.3%, respectively, amid choppy trading.

U.S. Treasury yields inched lower, with that on the two-year note last at 4.17%.

At 7:00 a.m. ET, Dow e-minis were up 24 points, or 0.07%, S&P 500 e-minis were up 1.5 points, or 0.04%, and Nasdaq 100 e-minis were down 12.75 points, or 0.1%.

Among other stocks, Virgin Orbit Holdings Inc soared 61.3% after Reuters reported the company is near a deal for a $200 million investment from Texas-based venture capital investor Matthew Brown.

GameStop Corp jumped 47.0% after the company posted a surprise profit for the fourth quarter, helped by lower costs and job cuts.

Nike Inc fell 0.48% in premarket trade after the sports apparel maker raised its full-year revenue outlook on Tuesday but warned of margin pressures.

(Reporting by Amruta Khandekar and Shubham Batra in Bengaluru; Editing by Nivedita Bhattacharjee and Vinay Dwivedi)

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