Minutes from the Fed’s May policy meeting, published later today, could provide clues as to whether it’s prepared to reconsider its vow to ‘expeditiously’ lift interest rates to fight the fastest inflation in four decades.
U.S. equity futures moved lower Wednesday, while the dollar bounced from a one-month low and Treasury yields held steady, as markets proceed cautiously ahead of the release of minutes from the Federal Reserve’s May policy meeting later in the session.
The Fed’s inflation fight, which will likely delivery 50 basis point rate hikes at consecutive policy meetings between now and September, has pounded domestic stocks and slowed economic growth prospects in the world’s biggest economy.
What it hasn’t done, as yet, is blunt the pace of consumer price increases, which are accelerating at the fastest pace in four decades, largely as a result of influences beyond the Fed’s control, such as Russia’s war on Ukraine, China’s Covid crisis and the knock-on disruptions they’ve caused to global supply chains.
That could give the Fed a reason to slow, or even pause, the pace of its tightening, although bets on a 50 basis point hike in both June and July remain well north of 90%, according to the CME Group’s FedWatch.
Minutes from the Fed’s April meeting will provide clues as to whether policymakers are sensitive to the affects of their hawkish strategy, particularly with respect to the job market, as data suggests key components of the economy are starting to show signs of rate-hike fatigue.
Atlanta Fed President Raphael Bostic said yesterday that he intended to “proceed carefully in tightening policy”, while being mindful of non-financial impacts and avoiding any “reckless” policy decisions.
European stocks were only modestly higher, despite a solid start, following a modest improvement in German consumer morale, based on a closely-watch GfK survey, and data showing its economy — the region’s largest — avoided recession over the first three months of the year.
In the U.S., benchmark 10-year Treasury bond yields — which move inversely to prices — traded at a one-month low of 2.745% overnight following yesterday’s shockingly poor new home sales figures and PMI data indicating slowdowns in both the manufacturing and services sector.
The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.47% higher at 102.336 in early New York trading.
On Wall Street, futures tied to the Dow Jones Industrial Average indicating a 180 point opening bell decline while those linked the S&P 500 were priced for a 23 point pullback. Futures linked to the tech-focused Nasdaq, which id down 28.85% for the year, are looking at an 85 point opening bell dip.
Wendy’s (WEN) – Get Wendy’s Company Report shares were one of the more active names in pre-market trading, rising 10% after activist investor Nelson Peltz said he was considering a takeover of the iconic restaurant chain.
The Street is looking for a solid bottom line of $1.29 per share, a 40% increase from last year, as chip prices march higher amid the supply chain snarls linked to China’s Covid crisis.
Revenues are expected to meet Nvidia’s February guidance of $8.1 billion, plus or minus 2%, although slowing sales of its ‘CMP’ chips, which are used by cryptocurrency miners, could shave some of that tally as the sector continues to struggle.
Nordstrom (JWN) – Get Nordstrom, Inc. Report shares rose 2% after the mall-focused retailer defied the sector’s recent gloom with a narrower-than-expected first loss paired with a boost to its full-year profit forecast.
It’s gains were pared, however, after Dick’s Sporting Goods (DKS) – Get Dick’s Sporting Goods, Inc. Report cautioned that same store sales, which fell 8.4% over the three months ending in April, would likely lag their 2021 pace for the remainder of the year, sending shares 18% lower in pre-market trading.