Stock futures slump as investors await Wednesday’s Fed rate decision

Expect some disagreement at the Fed tomorrow, says Virtus' Joe Terranova

Stock futures were cautious on Wednesday morning as investors awaited the Federal Reserve’s latest rate hike decision due on Wednesday to curb inflation.

Dow Jones Industrial Average futures rose 22 points, or 0.06%. Futures tied to the S&P 500 were roughly flat, while Nasdaq 100 futures rose 0.1%.

Stocks rose for a second straight day in regular trading Tuesday, driven by a weaker-than-expected inflation report. Consumer prices rose 7.1 percent year-on-year in November, below the 7.3 percent expected by economists surveyed by Dow Jones. MoM growth of 0.1% was also below expectations.

A signal that inflation may have peaked is good for stocks because it means the Fed could be closer to stopping rate hikes or shifting to rate cuts, which would drive stocks higher.

On Wednesday, the central bank will wrap up its December meeting and announce its latest rate hike. Investors generally expect a 50-basis-point hike — or half a percentage point — to be a smaller increase after four straight 75-basis-point hikes. One basis point is equal to one hundredth of one hundredth.

Federal Reserve Chairman Jerome Powell is also due to speak on Wednesday, offering further clues about the central bank’s policy into 2023. In meetings prior to this year, traders were sensitive to Powell’s language, interpreting his tone as hawkish or dovish.

“The market clearly believes there’s going to be a turning point or a pause, and that’s what we’re seeing today,” Steve Grasso, CEO of Grasso Global, said on CNBC’s “Fast Money.” [Powell] Cover it and the market will sell off. “

The Fed meeting is the last of the year. The next central bank meeting will start on January 1. 31 to February 1, 2023.

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