Wednesday December 15th

15-12-2021

Stock futures are little changed ahead of key Fed decision

U.S. stock index futures were little changed in early morning trading on Wednesday as investors readied for Wednesday’s highly anticipated Federal Reserve decision. Dow futures dipped about 25 points. S&P 500 futures were flat, and the Nasdaq 100 futures were up 0.1%. The Fed will conclude its two-day policy meeting on Wednesday and the public will hear from central bank Chairman Jerome Powell at a 2:30 p.m. ET news conference. The Fed is grappling with the highest inflation level in 39 years and the central bank is widely expected to announce an acceleration of the tapering of its bond-buying program, which was put in place during the pandemic to prop up the economy. “Investors remain on a buyers strike in front of the FOMC meeting,” Fundstrat’s Tom Lee wrote in a note. “Tapering is not the ‘hawkish pivot’ that ends bull markets, but it is a hawkish pivot relative to the massive easing since the pandemic started. So we think this buyers strike in front of FOMC could turn into a ‘buy the event.’” This sets the stage for a dramatic policy shift that will clear the way for a first interest rate hike next year. A CNBC Fed Survey predicts the Fed will double the pace of the taper to $30 billion at its December meeting, which would end the $120 billion in monthly asset purchases by about March. The central bank will then hike rates three times in each of the next two years, starting in June 2022, the survey respondents predict. “While the chairman is not likely to suggest any specific timeframe for when the funds rate will begin to be lifted, he probably will confirm that some members do want to move more quickly than previously announced in raising interest rates,” said Jim Paulsen, chief investment strategist for Leuthold Group. “I would not expect the Fed to say much that is not already anticipated by the financial markets,” Paulsen added. “Some of the recent stock market volatility may lessen after this two-day meeting and its press conference is finally concluded.” Retail sales for November came in worse than expected, rising 0.3% month-over-month. Economists surveyed by Dow Jones were looking for a 0.8% month. On the political front, congressional Democrats passed a bill raising the debt ceiling, sending it to President Joe Biden early Wednesday just under the wire for when Treasury Secretary Janet Yellen said the government would run out of spending power. On Tuesday, the major averages slipped, exacerbated by selling in software names like Microsoft and Adobe. The Dow Jones Industrial Average lost 106 points. The S&P 500 fell 0.75%. The technology-focused Nasdaq Composite was the relative underperformer, dipping 1.1% as Facebook-parent Meta Platforms, Amazon, Apple, Netflix and Google-parent Alphabet all closed lower. Also hurting sentiment Tuesday was the hotter-than-expected inflation reading for November’s producer price index showing a year-over-year increase of 9.6%, the fastest pace on record. This was above the 9.2% expected by economists, according to Dow Jones. The index rose 0.8% month over month, above the 0.5% expected. While the Fed meeting is in focus, investors are also monitoring the new Covid variant omicron. The World Health Organization on Tuesday warned the new Covid-19 omicron variant is spreading faster than any previous strain, and is likely in most countries of the world. Asia-Pacific markets were mostly down Wednesday, with Chinese markets declining as investors digested key Chinese economic data. Meanwhile, Chinese biotech firm BeiGene made its debut in Shanghai. Hong Kong markets led losses, with the Hang Seng tumbling 0.9% to close at 23,420.76. The Hang Seng tech index was down 1.52%. The Shanghai composite declined 0.38% to close at 3,647.63, and the Shenzhen component fell 0.73% to 15,026.21. Elsewhere, Japan’s Nikkei 225 inched down 0.1% to close at 28,459.72, while the Topix rose 0.52% to 1,984.10. South Korea’s Kospi closed near flat to 2,989.39. Oil prices fell for a third day straight on Wednesday on growing signs that supply growth will outpace demand next year, and as the World Health Organization said COVID-19 vaccines may be less effective against the Omicron variant. Brent crude futures fell 78 cents, or 1.1%, to $72.92 a barrel, after losing 69 cents on Tuesday. U.S. West Texas Intermediate (WTI) crude futures fell 85 cents, or 1.2%, to $69.88 a barrel, after losing 56 cents in the previous session. Gold prices stabilised near a two-week low on Wednesday, as investors await the U.S. Federal Reserve’s decision on the pace at which the central bank plans to taper its pandemic stimulus measures. Spot gold was little changed at $1,769.70 per ounce. U.S. gold futures fell 0.1% to $1,771.00.