U.S. stock futures hovered near the flatline early Wednesday as investors awaited a crucial Federal Reserve interest rate decision. Market participants are pricing in a 92% chance of a quarter-point hike, with focus also on upcoming inflation data and geopolitical tensions affecting oil prices. Recent market movements show Treasury yields climbing and stocks experiencing a downturn on Tuesday.
U.S. equity futures showed slight gains early Wednesday as markets braced for a pivotal interest rate decision from the Federal Reserve. This decision could signal the start of a new rate hiking cycle in the coming months.
S&P 500 futures and Nasdaq-100 futures were up 0.22% and 0.3%, respectively. Dow Jones Industrial Average futures also saw a rise of 113 points, or 0.2%.
In Asia, markets presented a mixed picture. Japan's Nikkei 225 declined 0.34%, while the Topix gained 0.7%. South Korea's Kospi edged up 0.12%, and the Kosdaq saw a dip of 1.05%. Australia's S&P/ASX 200 climbed 0.24%, while Hong Kong's Hang Seng Index slipped 0.18% and the CSI 300 fell 0.42%.
Futures markets indicated a strong probability, 92%, of a quarter-point rate hike by the Federal Reserve on Wednesday, according to the CME FedWatch tool. The likelihood of further hikes in October and December stood at 45% and 30%, respectively. The current target federal funds rate range is 3.5% to 3.75%.
The Fed's decision arrives amidst White House pressure to maintain current rates. Christopher Phelan, chairman of the Council of Economic Advisers, stated on CNBC that raising rates would be a "mistake," emphasizing that inflation data has been moving in a favorable direction.
"[It] doesn't make sense to raise rates now in my view," Phelan commented, noting that "inflation data has been in the right direction."
The U.S. consumer price index (CPI) registered a 3.4% increase over 12 months in August, a decrease from the recent peak of 4.2% in May. Month-over-month, CPI rose 0.4%, aligning with expectations. Core inflation, excluding volatile food and energy prices, saw a 0.3% increase, slightly exceeding forecasts.
Crude oil prices surged on Tuesday following reports of Saudi Arabia canceling shipments after drone attacks on its key export pipeline. U.S. West Texas Intermediate crude rose 4.4% to $105.83 per barrel, its highest closing price since May 19. Brent crude futures climbed 2.9% to settle at $108.75.
Treasury yields have been climbing on expectations of rising inflation. The 10-year Treasury yield was slightly above 5%, and the 30-year Treasury yield stood at 5.369%.
In a turbulent market session on Tuesday, U.S. stocks declined, with the S&P 500 falling 0.45% and the Nasdaq Composite dropping 0.78%. This downturn followed discussions over the weekend among leaders of large language model companies regarding potentially slowing product release schedules, impacting semiconductor and cloud service providers.
UK inflation jumped to 3.1% in August
The U.K.'s annual inflation rate surged to 3.1% in August, primarily driven by escalating gasoline and diesel prices. This reading marks the first time inflation has exceeded 3% since March. The Office for National Statistics (ONS) attributed the spike mainly to a 23% year-on-year increase in motor fuel costs.
— Chloe Taylor
European equities open higher
European stocks opened higher on Wednesday, with the pan-European Stoxx 600 index climbing 0.5%. Most regional sectors registered gains, led by London's FTSE 100 and Germany's DAX, which both rose around 0.4% in early trading.
— Chloe Taylor
Oil retreats amid rising U.S. inventories and Middle East tensions
Oil prices fell on Wednesday following a report indicating an increase in U.S. energy inventories. Traders are also closely monitoring developments in the Middle East, particularly following an attack on Saudi Arabia's East-West pipeline. Brent crude for November delivery dropped 1.02% to $107.64 a barrel, while WTI futures for October declined 1.29% to $104.46 per barrel. U.S. crude, gasoline, and distillate inventories reportedly rose last week, contrary to analysts' expectations of a draw.
—Justina Lee
10-year Treasury yield eases below 5% ahead of Fed decision
The benchmark 10-year Treasury yield retreated about 2 basis points to 4.979% on Wednesday, pulling back after touching a high not seen since July 2007 at 5.039% during the previous day's global bond sell-off. The 30-year Treasury yield edged down 1 basis point to 5.348%, while the 2-year yield hovered around 4.646%. Investors are keenly awaiting the Federal Reserve's interest-rate decision later today, with a significant majority expecting a rate hike. Concerns over global supply and the U.S. fiscal outlook, coupled with rebounding oil prices, have underpinned the recent market sell-off.
—Lee Ying Shan
BOJ poised to hike rates to 1.25%, hitting three-decade high: CNBC survey
A CNBC survey indicates the Bank of Japan is likely to raise rates to 1.25% at the conclusion of its two-day meeting on Friday, citing inflationary pressures. This move would accelerate the bank's tightening cycle, which began in March 2024. Approximately 89% of survey respondents anticipate a 25-basis-point hike, driven by rising inflation, wage growth, and U.S. government pressure. Japan's July headline inflation reached 1.9%, its highest this year, due to increased energy costs stemming from the Iran conflict, while real wages rose 2.4%.
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—Lisa Kim
Asian markets mixed; Nikkei opens lower, Kospi flat
Asia-Pacific markets opened with mixed results on Wednesday. Japan's Nikkei 225 lost 0.17%, while the Topix gained 0.55%. South Korea's Kospi was little changed, with the Kosdaq declining 0.69%. Australia's S&P/ASX 200 rose 0.24%.
— Lee Ying Shan
Asia-Pacific set for mixed open ahead of Fed decision
Asia-Pacific markets were anticipating a mixed open on Wednesday, with investors keenly awaiting the Federal Reserve's interest rate decision. Futures for Japan's Nikkei 225 indicated a potential rise, while Hong Kong's Hang Seng index futures and Australia's S&P/ASX 200 futures also suggested gains compared to their previous closing prices.
— Lee Ying Shan
Cryptocurrencies slump as Clarity Act fails Senate vote
Major cryptocurrencies experienced a significant downturn on Tuesday, with Bitcoin hitting a low of $74,936.78 and Solana falling to $95.784, levels not seen since mid-August. Ether also declined to $2,357.38. These drops occurred after the Senate's cloture vote on the Clarity Act failed, dealing a regulatory setback to the crypto industry. The Global X FinTech ETF (FINX) also saw a notable decline of 3.44%.
-- Tobias Burns, Gina Francolla
30-year fixed mortgage rate surpasses 7.2%
The average rate for a 30-year fixed mortgage has now exceeded 7.22%, according to Mortgage News Daily, reaching its highest point since January 14, 2025. This increase is closely linked to the benchmark 10-year Treasury yield, which recently topped 5% and hit a 19-year high.
—Gina Francolla, Darla Mercado
—Gina Francolla, Darla Mercado
Stock futures open flat on Tuesday night
U.S. stock futures traded flat on Tuesday night in New York. S&P 500 futures were up 0.09%, Nasdaq-100 futures gained 0.07%, and Dow Jones Industrial Average futures advanced 41 points, or 0.08%.
--Darla Mercado
