Market

Dow set to edge lower as stock-market investors await Federal Reserve Chairman Jerome Powell’s policy update

U.S. stock index futures were trading flat to slightly lower Wednesday as Wall Street braces for what is widely viewed as an important policy update from the Federal Reserve on the U.S.’s economic recovery from COVID and the pace of inflation.

How are stock benchmarks trading?

On Tuesday, the Dow
DJIA,
-0.27%

fell 94.42 points, or 0.3%, to 34,299.33; the S&P 500
SPX,
-0.20%

finished off 8.56 points, or 0.2%, at 4,246.59; the Nasdaq Composite
COMP,
-0.71%

declined 101.29 points, or 0.7%, to 14,072.86.

What’s driving the market?

It is all eyes on the Fed’s inflation outlook on Wednesday, with the U.S. central bank set to offer, at 2 p.m. Eastern Time, updates on its April policy statement, and its projections for where interest rates will stand in the future.

Fed Chairman Jerome Powell is likely to indicate, at a 2:30 p.m. press conference, that policy makers aren’t going to change interest rate policy, which stand at a range between 0% and 0.25%, at least through the end of 2022, economists say.

However, investors and strategists will be attuned to the Fed’s statements on the plan for reducing its pandemic-era monetary accommodation, including its purchases of $80 billion of Treasurys and $40 billion of mortgage-backed securities each month.

Last Thursday’s consumer-price index report from the U.S. Labor Department showed that the cost of living surged in May and drove the pace of inflation to a 13-year high of 5%, reflecting a broad increase in prices confronting Americans.

In the face of rising inflation, the timing of any tapering of asset purchases looks tricky for the U.S. central bank since the recovery in the labor market still looks shaky and is reflected in the weaker-than-expected May nonfarm payrolls report and the job openings data which hit a record 9.3 million.

Thus far the Fed has described evidence of inflation as largely derived from transitory factors, including a removal of lockdown protocols intended to damp the spread of coronavirus, as well as supply-chain bottlenecks.

Check out: 4 things to watch as the Fed makes its latest monetary-policy decision

Still, some prominent investors and economists have voiced the opinion that the Fed may be too complacent about rising prices and that they that could turn out to be more lasting that the central bank forecasts.

Read:An inflation storm is coming for the U.S. housing market

“We aren’t in the camp that says a sustained inflation problem is a done deal, but we do think that the Fed now needs everything to go right if inflation is to return to the target, as per the March forecasts, by the end of next year,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note.

A CNBC Fed survey indicates that market participants believe that the central bank may hold its bond-buying program steady through the end of the year, but begin to signal its intent to taper by October and begin doing so by the start of 2022.

In other news, China said it plans to release national reserves of major industrial metals as to rein in a soaring commodities prices amid a resumption of global economic activity. That news comes as data out of China showed that factory output slowed for a third straight month in May. Chinese industrial production rose 8.8% in May from a year ago, slower than the 9.8% uptick in April.

Elswhere, annual inflation in the U.K. exceeded the Bank of England’s target in May for the first time in almost two years. Consumer prices rose 2.1% on the year in May, the Office for National Statistics said Wednesday, the fastest pace of growth since July 2019.

Meanwhile, President Joseph Biden and his Russian counterpart Vladimir Putin were set to meet later Wednesday in Geneva.

Looking ahead, investors will see reports on U.S. housing starts and permits and a reading of import and export prices both due at 8:30 a.m. Eastern Time.

Which companies are in focus?
  • Oracle stock
    ORCL,
    -1.19%

    was in focus after Q4 results late Tuesday. The tech company reported fourth-quarter earnings of $4.03 billion, or $1.37 a share, on sales of $11.23 billion, up from $10.44 billion a year ago.

  • ARK Invest disclosed that it purchased DraftKings DKNG shares worth $42 million on Tuesday, the same day the short selling research firm Hindenburg alleged the company’s gambling-technology unit operates in countries where gambling is banned. DraftKings says the subsidiary, SBTech, doesn’t operate in any illegal market. The DraftKings purchases by Ark — in the Ark Innovation ETF ARKW and the Ark Next Generation Internet ETF ARKK—were the largest single stock purchase by the Cathie Wood-run fund manager on Tuesday.

  • Confluent IncCFLT, has set terms of its initial public offering, which could value the California-based data infrastructure software company at up to $8.33 billion.

  • Elanco Animal Health IncELAN said Wednesday it has entered an agreement to acquire Kindred Biosciences IncKIN for about $440 million, adding three potential dermatology blockbusters to its pipeline.

  • WalkMe LtdWKME, an Israeli customer engagement platform, said Wednesday its initial public offering priced at $31 a share, compared with its proposed price range of $29 to $32.

  • Amazon.com IncAMZN said Wednesday it has committed $300 million to help accelerate the creation of up to 3,000 new affordable housing units across the Puget Sound area in Washington, in Washington, D.C. and Nashville.

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