Wednesday January 26th


Dow futures rise more than 300 points ahead of important Fed announcement

U.S. stock market index futures rose Wednesday following another wild session for the market as investors await results from a Federal Reserve meeting expected to set the tone for 2022. Dow Jones Industrial Average futures climbed about 330 points, or 1%. S&P 500 futures added 1.3%. Nasdaq 100 futures gained 2%. Microsoft shares rose 4.3% in early morning trading after the company issued better-than-expected quarterly revenue guidance. Boeing was marginally higher after the aircraft maker reported positive cash flow for the first time since 2019, but took a $3.5 billion pre-tax charge on its 787 Dreamliner program. Tesla shares popped 3.6% with the electric vehicle marker slated to report earnings after the bell. Moderna rallied 2.8% in the premarket, rebounding after falling for eight straight days. The Fed is set to conclude its two-day policy meeting Wednesday and make an announcement in the afternoon. The central bank is not expected to make any policy changes, but investors will look for clues on when — and by how much — the Fed will raise interest rates later this year. Market participants will also look for hints on further steps the Fed will take to unwind pandemic-era aid. Recent market volatility is unlikely to deter the Fed from implementing as much as four or more interest rate hikes this year. “While significant stock market volatility leading up to an FOMC meeting would normally weigh on Fed policy and commentary, that is not the case this time around, given the extreme levels of inflation seen in recent months,” said Danielle DiMartino Booth, head of Quill Intelligence and former advisor to then-Dallas Fed President Richard Fisher. “Optically, it’s better for the Federal Reserve to ignore the stock market volatility, which is mainly affecting wealthy investors, and instead focus more on taming inflation, which is primarily affecting Main Street,” Booth added. The Dow ended the regular trading day Tuesday down 66 points, or 0.2%. However, the 30-stock average was down as much as 818.98 points on the session and briefly traded up by as much as 226.54 points. Those moves came a day after the Dow recovered from a 1,115-point deficit to post a slight gain. The S&P 500 and Nasdaq Composite also closed well off their session lows on Tuesday, but still lost 1.2% and 2.3%, respectively. Anu Gaggar, global investment strategist at Commonwealth Financial Network, said this sharp volatility is a byproduct of investors bracing for tighter monetary policy from the Fed. “The market is exhibiting withdrawal symptoms as it is dealing with the possibility of the removal of the Fed put,” Gaggar said. “It almost feels like the market is behaving a little incoherently, not knowing which way to go – go down because the Fed is tightening or go up because the Fed is finally acting to rein in inflation and is loading up on ammunitions while economic growth remains strong.” “Between rate hikes and tapering the $9 trillion balance sheet, we could be looking at a monetary regime that is changing quickly,” Gaggar said. Treasury yields have jumped sharply to start the year in anticipation of tighter monetary policy from the Fed. Last week, the benchmark 10-year note yield briefly broke above 1.9%. Yields nudged higher across the curve Wednesday morning, with the 10-year near 1.79%. Asia markets traded mixed on Wednesday, after U.S. equities tumbled overnight in another volatile session as investors await the Fed meeting statement later stateside. Oil and gold prices also jumped on Russia-Ukraine tensions. China’s Shanghai composite was up 0.66% to close at 3,455.67, and the Shenzhen component jumped 0.7% to 13,780.30. Hong Kong’s Hang Seng index was flat in the last hour of trade. The Hang Seng Tech index pared some earlier gains, last trading 0.79% higher. Elsewhere, Japan’s Nikkei 225 was down 0.44% to close at 27,011.33, while the Topix fell 0.25% to 1,891.85. Over in South Korea, the Kospi declined 0.41% to close at 2,709.24. Singapore’s Straits Times index jumped 0.91%. Oil rose to around $89 a barrel on Wednesday, within sight of a seven-year high, supported by tight supply and geopolitical tensions in Europe and the Middle East that raise concerns about further disruption. U.S. President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine. On Monday, Yemen’s Houthi movement launched a missile attack on a United Arab Emirates base. “Anxiety over potential supply disruptions in the Middle East and Russia is providing bullish fodder for the oil market,” said Stephen Brennock of oil broker PVM. Brent crude rose 73 cents, or 0.8%, to $88.93. On Jan. 20 it reached $89.50, the highest since October 2014. U.S. West Texas Intermediate (WTI) crude was up 48 cents, or 0.6%, to $86.08. Gold prices were steady on Wednesday as investors refrained from making big bets ahead of a U.S. central bank decision on the pace of policy tightening, while anxiety over Ukraine kept bullion supported near the previous session’s 10-week high. Spot gold held its ground at $1,846.87 per ounce, as of 0325 GMT, after hitting its highest level since Nov. 19 on Tuesday. U.S. gold futures were down 0.3% at $1,847.50.