Investing.com -- U.S. stock futures were mixed on Tuesday, with the Federal Reserve's all-important policy decision later in the week front and center. Elsewhere, economic bellwether Caterpillar (NYSE:CAT) is set to release its latest quarterly earnings, while hopes for a recovery in Chinese growth were dented by disappointing manufacturing activity data.
1. Futures mixed ahead of Fed meeting
U.S. stock futures were mixed on Tuesday, as investors geared up for the start of a two-day Federal Reserve policy meeting and digested a relief rally in the previous session.
By 05:57 ET (09:57 GMT), the Dow futures contract had added 111 points or 0.3%, S&P 500 futures had ticked up by 7 points or 0.2% and Nasdaq 100 futures were mostly unchanged.
The main indices on Wall Street closed higher on Monday, with the benchmark S&P 500 in particular notching a gain of 1.2% -- its largest one-day increase since late August. The 30-stock Dow Jones Industrial Average and tech-heavy Nasdaq Composite also rose by 1.6% and 1.2%, respectively.
Despite the slight rebound from recent declines, the major averages remain on pace to finish October in the red heading into the final trading day of the month.
2. Fed meeting highlights hectic week
The Federal Open Market Committee is scheduled to kick off a two-day meeting later today, which is expected to be the centerpiece of a busy week that will also feature a bevy of corporate earnings and key economic data.
Policymakers are widely tipped to leave the Fed funds target rate unchanged at its current level of 5.25% to 5.5% on Wednesday, according to Investing.com's Fed Rate Monitor Tool. Attention will likely focus on the Fed's adjoining policy statement and comments from Fed Chair Jerome Powell, as markets attempt to gauge the path ahead for interest rates.
Powell has previously warned of "old and new" uncertainties surrounding the central bank's main objective: corralling inflation, ideally without tightening policy to a level that could spark a meltdown in the American economy. Spiking U.S. Treasury yields, stronger-than-anticipated economic figures, and a surge in hostilities in the Middle East are just some of the issues officials must now address.
The Fed is not the only central bank to unveil a new policy announcement this week. On Tuesday, the Bank of Japan held borrowing costs at ultra-low levels and slightly altered the rhetoric around its yield curve controls. The Bank of England, meanwhile, will reveal its latest rate decision on Thursday.
3. Caterpillar, Pfizer to report
Earthmoving giant Caterpillar and drugmaker Pfizer (NYSE:PFE) are set to headline a clutch of fresh quarterly earnings on Tuesday.
Caterpillar, the world's biggest construction and mining equipment maker, predicted in August that its full-year operating margin would be at the top-end of its guidance range thanks to strong demand for heavy machinery.
But some analysts have flagged concerns that a run-up in mortgage rates could weigh on spending for residential housing, which accounts for a sizeable portion of Caterpillar's construction division.
For New York-based Pfizer , its third-quarter returns will come just weeks after the pharmaceutical group cut its annual revenue forecast by 13% due to lower-than-projected sales of its COVID-19 vaccines and treatments.
A post-pandemic drop in vaccination rates and an uptick in population-wide immunity have cooled the once red-hot clamor for the company's COVID jab. The shot previously fueled a spike in revenue to record levels in 2021 and 2022.
Elsewhere, the earnings docket for today includes chipmaker Advanced Micro Devices (NASDAQ:AMD) and Caesars Entertainment (NASDAQ:CZR.
4. Chinese factory activity contracts
Chinese manufacturing activity unexpectedly shrank in October, tempering hopes for a nascent rebound in the world's second-largest economy, as domestic businesses faced continued pressure from worsening local and overseas demand.
The manufacturing purchasing managers' index (PMI) read 49.5 in October, according to data from the National Bureau of Statistics. A mark below 50 indicates contraction.
The figure disappointed expectations that growth would remain steady at the 50.2 seen last month, in a blow for Chinese government officials who have faced intensifying calls to roll out further measures to help reinvigorate the country's sluggish post-COVID recovery.
China’s manufacturing PMI has now contracted in six of the 10 months so far in 2023.
5. Crude bounces back after sharp fall
Oil prices edged higher Tuesday, rebounding after a bruising session, although gains were limited as fears of slowing fuel demand in top crude importer China were exacerbated by the country's weaker-than-anticipated factory activity data.
By 05:59 ET, the U.S. crude futures traded 0.7% higher at $82.92 a barrel, while the Brent contract climbed 0.7% to $86.92 per barrel.
The market slumped nearly 3% on Monday, as traders chose to bank recent profits ahead of a string of major economic events this week, most notably the Fed decision on interest rates this Wednesday.
Violence in the Middle East remains in focus, with traders wary of the war between Israel and Hamas expanding into a wider conflict in the oil-rich region.