Stock futures slipped Wednesday as investors looked ahead to the Federal Reserve’s Wednesday meeting.
Futures tied to the Dow Jones Industrial Average shed 121 points or 0.35%. S&P 500 futures and Nasdaq Composite futures were down 0.32% and 0.2%, respectively.
The moves come after stocks jumped to end January on a strong note. The Dow Jones Industrial Average ended the day nearly 369 points higher, rising by 1.09%. The S&P 500 gained 1.46% to cap its best January performance since 2019. The tech-heavy Nasdaq Composite rose 1.67%, its best January performance in 22 years.
On Wednesday, the Federal Reserve will announce how much it is increasing interest rates in its latest effort to tame high inflation. Markets are expecting a 25 basis point, or 0.25 percentage point, bump from the central bank. On Tuesday, the employment cost index, a measure of wage increases, showed compensation rose 1% in the fourth quarter, less than the 1.1% estimate by Dow Jones.
Still, traders may be getting ahead of themselves in expecting a more dovish tone from the Fed, or looking for signs that a pause in hikes or even a pivot is coming soon.
“Aggressive tightening in 2022 has led to signs of decelerating inflation but from levels that remain unacceptably high,” Ron Temple, chief market strategist at Lazard said in a Tuesday note. “With a 25bps hike already discounted by markets, Powell’s task is to unambiguously signal the Fed’s commitment to tame inflation.”
The Federal Reserve will announce its decision Wednesday afternoon, followed by Chairman Jerome Powell’s comments.
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