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U.S. futures show cautious trade ahead of Fed

Published 03/16/2016, 07:01 AM
© Reuters.  Fed chief Yellen expected to eclipse data and oil
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Investing.com – U.S. futures pointed to a flat open on Wednesday as equities stateside appeared to prefer to maintain a holding pattern before the Federal Reserve’s March-rate decision and the following press conference from the U.S. central bank’s chief Janet Yellen, even as investors prepared to digest a slew of economic data and kept an eye on the rebound in oil prices.

The blue-chip Dow futures inched up 7 points, or 0.04%, by 10:58GMT, or 6:58AM ET, the S&P 500 futures edged forward only a quarter point, or 0.01%, while the tech-heavy Nasdaq 100 futures advanced 3 points, or 0.06%.

Markets do not expect changes to the federal funds rate (FFR) at this meeting with most experts suggesting that June could be the first opportunity for a hike.

However, close attention will be paid to the economic forecasts and, especially, the dot plot that shows Fed members’ forecasts for the future path of interest rates.

The FOMC statement will center attention as investors scour the document for language changes, only to be replaced in the headlines by remarks from the Fed chief herself who will further clarify the central bank’s position on the economy, unemployment and the path of interest rates.

With futures on FFR placing the probability of a rate move at Wednesday’s meeting at only 2%, the key for markets will be the Fed’s wording coming off the debate between Fed hawks who are worried that hikes could fall behind the curve on controlling inflation and doves who remain concerned about downside risks to the still-fragile U.S. economy.

Indeed, Goldman Sachs (NYSE:GS) warned on Tuesday that the danger from the meeting was precisely that comments could turn out to be more hawkish than markets expected. They recommended taking long positions in the dollar based on that strategy.

Even though the Fed meeting and press conference will undoubtedly eclipse the day’s events, the U.S. will release a slew of data on Wednesday.

The highlight will be on February inflation data due at 12:30GMT, or 8:30AM ET. The consensus forecast is that the report will show consumer price inflation fell 0.2% last month, while core CPI is forecast to rise 0.2%.

At the same time, the U.S. will also publish data on February building permits and housing starts, followed by a report on industrial production for February at 13:15GMT, or 9:15AM ET.

Meanwhile, crude bounced back from its recent 2-day rout after OPEC and non-OPEC producers agreed to hold their next meeting on a plan to freeze output levels in Doha, Qatar on April 17, even without the attendance of Iran.

After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. oil inventories rose by just 1.5 million barrels in the week ended March 11, its lowest increase in four weeks and well below forecasts for a gain of 3.4 million barrels.

Furthermore, traders waited on Wednesday for the U.S. Energy Information Administration to release its weekly report on oil supplies at 14:30GMT, or 10:30AM ET, amid expectations for a gain of 3.4 million barrels.

U.S. crude futures rose 2.04% to $37.08 by 11:00AM GMT or 7:00AM ET, while Brent oil traded up 1.65% to $39.38.

In a relatively light business calendar, investors will wait for earnings from FedEx Corporation (NYSE:FDX). The package delivery company is considered a bellwether of demand in the global economy.

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