Wednesday September 22nd


Dow futures bounce 200 points ahead of Fed decision as stocks try to shake September slump

U.S. stock index futures were higher on Wednesday ahead of the Federal Reserve’s decision on monetary policy as stocks try to snap out of their September slump. Futures on the Dow Jones Industrial Average futures rose 200 points, or 0.6%. S&P 500 futures added 0.5% and Nasdaq 100 futures gained 0.3%. The S&P 500 is down 3.7% so far in September, including a 1.7% drop on Monday for its worst day since May. Major averages attempted to rebound on Tuesday but failed with the Dow and S&P 500 finishing in the red for the fourth day in a row. The Dow is down 4% in September. At the center of investor concerns is embattled Chinese property developer Evergrande, which is facing a possible default if it can’t make millions of dollars in debt payments on U.S. dollar-denominated bonds this week. Evergrande’s shares in Hong Kong are down nearly 90% since July 2020 as China cracks down on real estate speculation. Investors worry about a step down in global economic growth if China slows their property market too much or lets Evergrande fail. Helping sentiment overnight was word from Evergrande that its real estate group would pay the interest on time on a mainland-traded bond denominated in yuan. Commodity-related stocks led the comeback in premarket trading Wednesday as fears eased about ripple effects from Evergrande. Dow, Freeport-McMoRan, Occidental Petroleum and Exxon were all early winners. China exposed Wynn Resorts bounced more than 1%. “We’re still in a position where ultimately stocks are going to rally hard off this, because unless Evergrande is going to cause a real seismic effect on the U.S. economy, the U.S. fundamentals are in good shape,” Fundstrat’s Tom Lee said on CNBC’s “Fast Money” Tuesday night. The Federal Reserve will conclude its two-day meeting on Wednesday and release a policy statement with economic and interest rate forecasts at 2 p.m E.T. Chairman Jerome Powell will then hold a press conference after. The central bank has the difficult task of soothing markets during a tumultuous month, while at the same time preparing investors for the removal of some monetary stimulus. Powell has previously said a tapering of the Fed’s emergency $120 billion in bond buying could begin as soon as this year. “I think they’re going to lay out that they had a discussion on tapering. I don’t think they’re going to provide any details,” BlackRock chief investment officer of global fixed income Rick Rieder told CNBC. “I think they’re going to provide a framework where they can start doing it in November or December.” FedEx shares tumbled 5% in premarket trading after profit fell at the shipper last quarter because of rising labor costs. FedEx also cut its forecast for the full year. Markets in mainland China fell more than 1% on Wednesday’s open before closing mixed amid the ongoing Evergrande crisis, as markets reopened for trade after a two-day holiday. Both the Shanghai composite and Shenzhen component dropped more than 1% in early trade, before easing off on some of those losses. The Shanghai composite shed all earlier losses and closed 0.4% higher at 3,628.49 while the Shenzhen component slipped 0.573% to about 14,277.08. Meanwhile, the CSI 300 index that tracks the largest stocks listed on the mainland declined 0.7% on the day to 4,821.77. Markets in Hong Kong were closed for a holiday. On Monday, the Hang Seng had plunged more than 3% before paring some losses on Tuesday. Elsewhere in Asia, the Nikkei 225 in Japan slipped 0.67% to close at 29,639.40 while the Topix index shed 1.02% to finish the trading day at 2,043.55. The Taiex in Taiwan dropped 2.03% on the day to 16,925.82. South Korea was closed for a holiday. Oil prices climbed more than $1 on Wednesday, extending overnight gains after industry data showed U.S. crude stocks fell more than expected last week in the wake of two hurricanes, highlighting tight supply as demand improves. Prices were also supported as some OPEC members struggle to raise output and by a general sense of energy market shortages amid a power and gas crisis in Europe. U.S. West Texas Intermediate (WTI) crude futures rose $1.04, or 1.45%, to $71.51 a barrel, adding to a 35- cent gain from Tuesday. Brent crude futures climbed 94 cents, or 1.3%, to $75.30 a barrel, after gaining 44 cents on Tuesday. Gold prices were steady on Wednesday as investors braced for the outcome of a U.S. Federal Reserve meeting and chief Jerome Powell’s remarks on reducing its massive support for the pandemic-hit economy. Spot gold rose 0.1% to $1,775.36 per ounce by 0840 GMT, while U.S. gold futures fell 0.2% to $1,775.00.