All Eyes are on U.S. Fed Interest Rate Decision and Commentaries

Stock futures are rising on today’s premarket as investors await the Federal Reserve's latest interest rate decision in its effort to curb inflation, but not hurt the economy at the same time. It will finally happen later tonight. At the time of writing, Dow Jones Industrial Average futures rose just 0.09%. Conversely, futures tied to the S&P 500 and the Nasdaq Composite ticked down 0.03% and 0.14%, respectively.

U.S. stocks closed higher Tuesday in a choppy session, after consumer prices showed inflation continued to retreat from its June peak. The Dow Jones Industrial Average DJIA, +0.30% rose about 0.3%, ending near 34,110, after initially climbing about 700 points in early trade. The S&P 500 index gained 0.7% and the Nasdaq Composite Index advanced 1%. The November consumer price index was 7.1% on the year, less than the 7.3% gain expected. The 0.1% increase on a monthly basis was also less than anticipated. Lower inflation, though still painfully high, gave more hope to investors that the Federal Reserve might be able to slow down increasing rates, while potentially pausing at a “terminal,” or peak, rate that produces a milder landing for the U.S. economy.

The inflation headlines boosted tech stocks, which become more attractive when borrowing costs fall. Shares of all the FAAMG names rebounded. IBM (IBM) and Salesforce (CRM) shares advanced by 1%. A moderately correcting U.S. dollar sent oil futures higher, and that propped up shares of Chevron (CVX), Halliburton (HAL) and ExxonMobil (XOM), and other classic oil producers.

Moderna (MRNA) was the best-performing component in the S&P 500, skyrocketing almost 20%, and Merck (MRK) shares added 1.8%, after the two biotech firms announced positive results from a trial of their experimental vaccine treatment for melanoma.

European stocks opened lower today and have pulled back further by late afternoon trading. Rate fears are likely to weigh down on sentiment, as the European Central Bank and the Bank of England, BoE, are all due to announce interest rate decisions, on Wednesday and on Thursday, respectively. The ECB is expected to continue to hike benchmark rates, albeit at a slower pace, with inflation seen to be close to a peak and the Pan-European financial regulator looking to start tapering its vast asset holdings of government bonds. At 3:15 p.m. CET, while Germany’s DAX Index and France’s CAC 40 Index retreated by 0.42% and 0.25%, respectively, U.K.’s FTSE 100 Index remained virtually unchanged. The annual inflation rate in the UK eased to 10.7% in November 2022 from 11.1% in October, which was the highest reading since October 1981. Inflation came in at less than anticipates, with economists expecting CPI inflation to fall to 10.9%.

Most Asia-Pacific markets rebounded earlier today, reacting to the improving news on the U.S. inflation data though. Japan’s Nikkei ended the session higher by 0.72%. In mainland China, both the Shanghai Composite and the Shenzhen Composite closed relatively flat. Concurrently, Hong Kong's Hang Seng partially recovered a losing streak by adding 0.39%, while South Korea's Kospi Composite spearheaded by 1.13% at the close. The Indonesian and New Zealand markets, however, closed in the red.