The major U.S. stock index futures are signaling a positive start on Wednesday, following a largely downward close of the previous trading session. Investors are expected to buy stocks at lower valuations after Tuesday's downturn resulted in the Dow Jones Industrial Average closing down for the ninth consecutive session, marking its longest losing streak since 1978 and reaching its lowest closing figure in almost a month.
Trading at the beginning of the session is likely to be restrained as market participants await the Federal Reserve's monetary policy announcement later today. The consensus is for the Fed to reduce interest rates further, with the CME Group's FedWatch Tool suggesting a 98.8 percent likelihood of a quarter-point rate cut. Consequently, significant attention will be directed toward the Fed's accompanying statement and officials' updated economic projections, particularly concerning future interest rate forecasts.
Concerns have arisen due to persistent inflation data, which suggests the Fed may decelerate its rate reduction pace next year more than previously expected.
During Tuesday's session, stocks maintained their downward trajectory, with the tech-centric Nasdaq retracting from Monday's record high, while the Dow continued its losing streak. Although the major indexes pulled back from their lowest daily points before closing, they remained in the negative. The Dow fell by 267.58 points, or 0.6%, to 43,449.90; the Nasdaq decreased by 64.83 points, or 0.3%, to 20,109.06; and the S&P 500 declined by 23.47 points, or 0.4%, to 6,050.61.
The decline in Wall Street was partially due to a retreat in technology stocks, which had previously driven gains. Notably, networking stocks dipped significantly, with the NYSE Arca Networking Index dropping by 2.2% after hitting a new closing high on Monday.
Semiconductor stocks also faced notable weakness, as indicated by the Philadelphia Semiconductor Index's 1.6% loss. Broadcom (AVGO) shares retreated following a recent rise, while Nvidia (NVDA) fell further after entering contraction territory earlier in the week.
Apart from the tech sector, financial stocks experienced significant downturns, with the NYSE Arca Broker/Dealer Index and the KBW Bank Index each falling by 1.5%. Sectors such as telecom, housing, and steel also declined, though pharmaceutical stocks defied the trend due to a 4.7% surge in Pfizer (PFE) shares, buoyed by its revenue projections aligning with 2025 estimates.
Amid these movements, traders remained focused on the Federal Reserve's eagerly awaited policy announcement.
Adding to concerns regarding future rate trends, the Commerce Department released a report showing unexpectedly strong retail sales growth for November. Jeffrey Roach, Chief Economist at LPL Financial, noted, “This report will likely intensify the Fed’s discussions on the 2025 policy path. Unless the labor market weakens considerably, investors should anticipate rate easing next year, albeit not to the extent initially hoped for.”
**Commodity and Currency Markets**
Crude oil is seeing an increase, trading up $0.71 at $70.79 per barrel, after a decrease to $70.08 on Tuesday. Conversely, gold is nearly unchanged at $2,661.70 per ounce, following an $8 drop in the previous session.
In currency markets, the U.S. dollar is slightly stronger against the yen, trading at 153.87 yen compared to Tuesday's 153.46 yen close in New York. The dollar maintains its position against the euro, holding steady at $1.0491.
**Asia**
Asian markets ended with mixed results amidst cautious trading on Wednesday, as investors waited for the outcome of the Federal Reserve meeting. A 25 basis point rate cut seems probable, with the Summary of Economic Projections and Fed Chair Jerome Powell's press conference potentially indicating shifts in the scale and timing of anticipated future rate cuts.
Analysts predict a hawkish revision in interest rate forecasts in the dot plot, aligning with market trends since the last update in September.
The U.S. dollar remained stable against major currencies in Asian trading, while gold saw little change. However, oil prices advanced after a two-day slide, spurred by industry reports showing a significant decline in U.S. commercial crude inventories.
Meanwhile, China's Shanghai Composite Index climbed 0.6% to 3,382.21 following reports that China plans a record budget deficit for 2025 and the State-owned Assets Supervision and Administration Commission has urged state firms to enhance market value management of listed companies.The Hang Seng Index in Hong Kong rose by 0.8%, closing at 19,864.55, spurred by optimism surrounding Chinese stimulus measures aimed at boosting consumption. Meanwhile, Japanese markets experienced significant declines as investors awaited the Bank of Japan's interest-rate decision on Thursday. It is anticipated that the central bank will maintain its current interest rates, pending more concrete insights into domestic wage and spending patterns, as well as the policy directions under U.S. President-elect Donald Trump. The Nikkei 225 Index dropped by 0.7% to 39,081.71, with the broader Topix Index slightly down by 0.3% at 2,719.87.
In the automotive sector, stocks surged following news of a potential merger between Nissan and Honda. Shares of Nissan Motor surged by 23.7%, whereas Honda Motor saw a decline of over 3%. Toyota Motor stocks increased by more than 2%, and Mitsubishi Motors' shares skyrocketed by 19.7%.
In Seoul, the Kospi index climbed by 1.1% to 2,484.43, buoyed by strong performances from large-cap stocks, including Hyundai Motor, which rose by 4.8%, and Samsung Electronics, which added 1.3%.
Australian markets wrapped up a volatile session on a flat note. Gains in healthcare stocks balanced out the declines in energy and gold mining stocks. Insignia Financial's shares plunged by 4.2% after rejecting a takeover bid from Bain Capital valued at A$2.67 billion ($1.69 billion). Conversely, New Zealand's S&P/NZX-50 Index dipped slightly, by 0.4%, closing at 12,865.55.
Turning to Europe, stocks made modest gains on Wednesday in anticipation of upcoming meetings by the Federal Reserve and the Bank of England. Market expectations were set for a 25 basis point rate cut from the Federal Reserve later in the day. Investors were eager to analyze the Fed's updated economic forecasts and dot plot for insights into potential rate cut trajectories through 2025. Despite new data indicating a rise in UK inflation to its highest level in eight months, the British pound remained steady. The consumer price index indicated an annual increase of 2.6% in November, a jump from 2.3% in October, with core inflation excluding energy, food, alcohol, and tobacco prices advancing to 3.5% from 3.3%. These figures bolstered expectations that the Bank of England would maintain its current interest rates at its final meeting of the year on Thursday. While the German DAX Index edged up by 0.2%, both the French CAC 40 Index and the UK’s FTSE 100 Index recorded slight increases.
Stocks such as ASSA ABLOY benefited from positive momentum after acquiring U.S.-based Norshield Security Products. Additionally, shares in Kingfisher, a UK home improvement company, rose following its sale of Brico Depot Romania to Altex Romania for €70 million. Character Group, focusing on toys, games, and giftware, saw gains after its year-end results met expectations. Hardide also experienced a jump after securing a 10-year contract to coat aerospace cargo door components. French automaker Renault, with a 23% stake in Japan's Nissan, rallied following reports of merger talks between Honda and Nissan. Additionally, Kontron AG, a German tech provider, saw its shares soar after securing a significant €165 million order from a European defense company.
In the U.S., the Commerce Department released a report on Wednesday highlighting an unexpected decline in housing starts for November, alongside a notable surge in building permits. Housing starts decreased by 1.8% to an annual rate of 1.289 million, following a 3.2% decrease in October. Economists had anticipated a 2.2% increase to 1.340 million. In contrast, building permits rose sharply by 6.1% to 1.505 million, after a slight decrease of 0.4% in October; expectations were for a 1.0% increase. Building permits, a forward-looking indicator of housing demand, surpassed projections.
At 10:30 am ET, the Energy Information Administration is set to release oil inventory data for the week ending December 13th, with expectations of a 1.7 million barrel decrease following a drop of 1.4 million barrels the previous week. The Federal Reserve is scheduled to announce its monetary policy decision at 2 pm ET, followed by a press conference from Fed Chair Jerome Powell at 2:30 pm ET.
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