Stock futures are rising as traders prepare for the Fed decision

admin May 4, 2022

27 4 minutes read

Stock futures are rising as traders prepare for the Fed decision

US stock futures rose Wednesday morning, with investors looking forward to the Federal Reserve’s latest monetary policy decision amid rising inflation and a continued tight US labor market.

The contracts for the S&P 500, Dow and Nasdaq each rose in the pre-market. Treasury interest rates stabilized, and the 10-year reference rate hovered just below 3%, or close to the highest level since the end of 2018.

Investors are awaiting the Federal Reserve’s monetary policy statement and press conference from Chairman Jerome Powell later Wednesday afternoon. The central bank is generally expected to raise interest rates by 50 basis points for the first time since 2000. Such an increase will be double the 25 basis point increase the Fed launched in mid-March, which in itself had been the first interest rate increase since 201[ads1]8. This will bring the target area for the federal funds interest rate between 0.75% and 1.00%, compared to the current range of between 0.25% and 0.50%.

Expectations of this large rate hike have been building up for several weeks now among market participants, particularly given comments from key Federal Reserve officials who appear to support such a move. Powell said during a public appearance with the International Monetary Fund earlier this month that he thought it would be “appropriate … to move a little faster” with raising interest rates, and that 50 basis points were “on the table” for May. And the Fed is also expected to use the May meeting to announce the start of quantitative easing, or rolling of assets from the central bank’s $ 9 trillion balance sheet.

Outlook for higher interest rates has created volatility in the stock markets, which in the last two years have become accustomed to ultra-low interest rates and generally easy monetary policy. At the same time, however, many analysts have suggested that the Fed let its pandemic support policy last too long, allowing inflation to rise to the fastest since the 1980s. And after GDP growth in the United States became negative in the first three months of the year, the question remains whether the Fed will now be able to tighten policy without tipping the economy into a deep downturn.

“Because the market has priced in a 50 basis point rate hike at the May Reserve’s May meeting, the focus will immediately shift to how many half-point increases the Fed expects to launch during the 2022 balance sheet,” said Danielle DiMartino Booth, CEO. and chief strategist at Quill Intelligence, wrote in an email Tuesday. “The Fed would shock markets if it failed to deliver a more aggressive policy via a 50 basis point rate hike on Wednesday. “

“The Federal Reserve’s credibility is at stake, given the rise in inflation, which has proven to be anything but temporary,” Booth added. “Interest rates are too low and markets have been too accustomed to almost unlimited liquidity from the Fed’s bond purchases. Powell’s biggest folly would be to insist that the economy is very strong in the face of overwhelming evidence that it is slowing down and slowing down quickly.”

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07:39 ET: Uber puts out better than expected quarterly results, guidance

Uber (UBER) released estimates that top results for the first quarter and guidance for the current quarter on Wednesday morning, with the tour visiting company signaling that it worked through driver shortages while maintaining solid profitability.

Revenue more than doubled during the first quarter to $ 6.9 billion, topping estimates at $ 6.1 billion, according to Bloomberg compiled data. Adjusted EBITDA increased to $ 168 million, and also came ahead of the expected $ 135 million. Trips in the first quarter increased by 18% compared to last year to 17.1 billion, which underlines the ongoing increase in demand for riders.

For the current quarter, Uber said it sees gross orders between $ 28.5 million and $ 29.5 billion, and adjusted EBITDA between $ 240 million and $ 270 million.

Uber shares lost early trading after the results. Earlier in the night, Uber shares had fallen in sympathy with Lyft’s shares, which fell after the company offered an income and earnings forecast for the current quarter that did not meet analysts’ expectations.

Uber was previously scheduled to report its quarterly results after the market closed on Wednesday, but according to Lift’s report, “rescheduled to provide a more timely update on the company’s performance and guidance before the market opens,” according to a statement.

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