Stocks rebound ahead of Fed decision

Selina Johansson

Stocks gained Wednesday morning to shake off some losses after a couple of volatile session on Wall Street. Investors looked to the Federal Reserve’s latest statement and press conference to remove some uncertainty on the outlook for monetary policy. 

The S&P 500 rose by more than 1% just after the opening bell. The index closed lower for a fifth time in six sessions on Tuesday, extending volatility after Monday’s rollercoaster trading day. The Nasdaq gained more than 2%. Brent crude oil futures (BZ=F), the international standard in energy markets, jumped to more than $90 per barrel for the first time since 2014, with concerns over supply disruptions mounting as tensions between Russia and Ukraine mounted. 

Microsoft (MSFT) shares reversed overnight losses and rose Wednesday morning after the company delivered better-than-expected fiscal second-quarter revenue and earnings. Shares of chipmaker Texas Instruments (TXN) also gained after offering a better-than-expected outlook for current-quarter sales despite concerns over ongoing semiconductor shortages. Companies including Tesla (TSLA) and Intel (INTC) are poised to report results on Wednesday. 

For markets, the Federal Reserve’s latest monetary policy statement and press conference from Fed Chair Jerome Powell later in the day will be the banner event. Investors have been pricing in a more aggressively hawkish central bank as the Fed works to rein in inflation currently running at a four-decade high. Over the past couple months, the Fed has signaled through its December meeting minutes and in public remarks that it will likely begin raising interest rates from current near-zero levels in March. It is also considering beginning to roll assets off its balance sheet after amassing some $9 trillion in its bond portfolio. 

“If you think about what’s happened in the markets, it indicates the degree of sensitivity market participants have to what is going to be the new rate environment and the new liquidity environment,” David Bailin, Citi chief investment officer and head of Citi global wealth management, told Yahoo Finance Live on Tuesday.

“The Fed made a major reversal about five weeks ago when it said that it was both going to raise rates and also consider quantitative tightening, which effectively means that you and I are going to have to finance the debt that is necessary issued by the Treasury instead of the Fed,” he added. “So with all of that, I think they’re going to look at what happened [in markets] and they’re going to say, our goal here is not to shut the economy and to make things slow. The goal here is to signal their willingness to fight inflation to the extent that they can.”

Other strategists agreed that the Fed’s recent, more hawkish tilt has left investors so far with more questions than answers. While the Fed’s December projections suggested policymakers were likely to raise rates three times this year, many market participants have now priced in expectations for four hikes, while others have suggested as many as five or six hikes may be on the table given the current inflationary backdrop. And though Powell has suggested the Fed would continue contemplating quantitative tightening, the central bank has yet to offer a concrete timeline for the start of this process. 

“We are in a period of heightened uncertainty,” John Bellows, Western Asset portfolio manager, told Yahoo Finance on Tuesday. “The market’s trying to figure out where that pivot ends, what eventually anchors Fed policy going. forward and it’s still trying to calibrate correctly the scale and magnitude of that Fed pivot.” 

10:21 a.m. ET: New home sales surge to reach highest level since March 2021 in December

U.S. new home sales jumped far more than expected at the end of last year, underscoring still-elevated demand for housing even as home prices continued to jump and inventory remained constrained.

New home sales rose 11.9% on a month-over-month basis in December, the Commerce Department said Wednesday. This brought sales to a seasonally adjusted annualized rate of 811,000, or the most since March 2021. In November, new home sales had risen by 11.7%, with this figure downwardly revised from the 12.4% rate previously reported. 

9:32 a.m. ET: Stocks open higher, Nasdaq gains 2.5% 

Here’s where markets were trading Wednesday morning just after the opening bell: 

  • S&P 500 (^GSPC): +60 points (+1.38%) to 4,416.45

  • Dow (^DJI): +242.46 (+0.71%) to 34,540.19

  • Nasdaq (^IXIC): +314.31 (+2.32%) to 13,853.60

  • Crude (CL=F): +$0.99 (+1.16%) to $86.59 a barrel

  • Gold (GC=F): -$14.90 (-0.80%) to $1,837.60 per ounce

  • 10-year Treasury (^TNX): -1.4 bps to yield 1.771%

8:55 a.m. ET: U.S. trade deficit unexpectedly jumps to record level in December

The U.S. goods trade gap yawned to a record high in December, unexpectedly soaring compared to the prior month as imports rose further.

The trade deficit reached $101.0 billion in the final month of 2021, growing from November’s upwardly revised $98.0 billion deficit, according to new data from the Commerce Department on Wednesday. Consensus economists had expected the trade deficit to narrow to $96.0 billion, according to Bloomberg consensus data.

Imports rose by $5.1 billion, or 2.1%, compared to November to reach $258.3 billion. Exports, meanwhile, rose by 1.4%, or $2.2 billion, to come in at $157.3 billion during the month. 

7:23 a.m. ET Wednesday: Stock futures add to earlier losses

Here’s where markets were trading Wednesday morning before the opening bell: 

  • S&P 500 futures (ES=F): +62.75 points (+1.44%), to 4,411.75

  • Dow futures (YM=F): +371 points (+1.09%), to 34,556.00

  • Nasdaq futures (NQ=F): +278.75 points (+1.97%) to 14,419.5

  • Crude (CL=F): +$0.69 (+0.81%) to $86.29 a barrel

  • Gold (GC=F): -$8.40 (-0.45%) to $1,844.10 per ounce

  • 10-year Treasury (^TNX): +0.5 bps to yield 1.79%

6:15 p.m. ET Tuesday: Stock futures add to earlier losses

Here’s where futures began trading Tuesday evening:

  • S&P 500 futures (ES=F): -31 points (-0.71%), to 4,318.00

  • Dow futures (YM=F): -164 points (-0.48%), to 34,021.00

  • Nasdaq futures (NQ=F): -156.50 points (-1.11%) to 13,984.25

Traders work on the floor of the New York Stock Exchange at the opening bell January 25, 2022. – Wall Street stocks fell early January 25 following a deluge of mostly solid corporate earnings but a lower global growth forecast from the IMF. (Photo by TIMOTHY A. CLARY / AFP) (Photo by TIMOTHY A. CLARY/AFP via Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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