Fed meeting to begin, Instacart's IPO pricing - what's moving markets

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Investing.com -- U.S. futures point higher, with markets almost certain that Federal Reserve policymakers will hold interest rates steady following a much-anticipated policy-setting meeting that starts on Tuesday. Elsewhere, Instacart shares are set to begin trading in New York after the online grocery delivery service priced its initial public offering at the top-end of its target range, while the United Auto Workers union warns of further U.S. plant closures if fraught negotiations with three major carmakers show no signs of progress.

1. Futures edge higher ahead of Fed meeting

U.S. stock futures held above the flatline, as investors looked ahead to the beginning of a two-day Federal Reserve policy meeting on Tuesday.

At 05:22 ET (09:22 GMT), the Dow futures contract had added 20 points or 0.1%, S&P futures inched up by 3 points or 0.1%, and Nasdaq 100 futures were mostly unchanged.

The main indices on Wall Street posted positive sessions on Monday, buoyed by a fresh jump in oil prices that bolstered shares in energy companies like ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX). A move earlier this month by Saudi Arabia and Russia to extend production cuts has recently pushed up crude prices to multi-month highs.

Chipmakers, however, remained under pressure after Taiwan's TSMC reportedly asked its main suppliers to delay the delivery of top-end manufacturing equipment. British semiconductor designer Arm (NASDAQ:ARM), which last week completed the biggest initial public offering in nearly two years, saw its shares slip by 4.5% in New York, as traders fretted over broader economic uncertainty.

2. Fed gathering in focus

The Federal Reserve is widely tipped to keep interest rates unchanged after policymakers wrap up their meeting on Wednesday, with Investing.com's Fed Rate Monitor Tool showing that markets are all but certain that borrowing costs stay put at a range of 5.25% to 5.50%.

But the U.S. central bank's plans for the rest of 2023 are still somewhat mysterious. After this month, Fed officials will have two more closely-watched gatherings this year to decide whether another rate hike is warranted to prevent recently cooling inflation from accelerating.

Data last week showed that a surge in petrol prices drove a spike in consumer price growth in August to its fastest rate in 14 months, although the annual "core" reading stripping out food and fuel was the slowest in two years. The numbers helped solidify expectations that the Fed will refrain from resuming a long-standing tightening campaign in September.

Meanwhile, there is currently less than a 40% chance that interest rates will be lifted again this year, according to the Fed Rate Monitor Tool. Yet with signs indicating a rise in car and health insurance costs, as well as a potential increase in vehicle prices stemming from an ongoing auto workers strike, some economists see upside risks to inflation.

What the Fed has to say about the future development of price gains will likely factor into the reaction to this week's meeting.

3. Instacart's top-end IPO pricing

Instacart has priced its initial public offering at $30 a share, hitting the top-end of an upwardly revised target range, in the latest sign of a renaissance in the once-dormant market for new listings.

The San Francisco-based company raised $660 million from the sale of 22 million shares. The shares are set to start trading on the Nasdaq on Tuesday.

The online grocery delivery service's share sale gives it a valuation of $9.9 billion on a fully diluted basis, albeit at a fraction of the $39 billion value assigned to the company by bullish private investors in March 2021 during a pandemic-era boom in at-home food orders.

Even still, Instacart's announcement was a marker of a nascent recovery in an IPO market that had been quieted by economic jitters and elevated interest rates. Separately on Monday, marketing and data automation group Klaviyo improved its IPO pricing range ahead of the public debut of its shares this week.

Fueling the optimistic sentiment has been strong demand for Arm's flotation, which saw shares in the SoftBank-backed firm soar well above their own top-end pricing in their inaugural trading day last Thursday.

4. UAW threatens more U.S. plant strikes

The United Auto Workers union has warned that more U.S. factories would go on strike if no progress is made in talks with automaking giants Ford (NYSE:F), General Motors (NYSE:GM) and Jeep-manufacturer Stellantis (NYSE:STLA).

In a video message on Monday, UAW president Shawn Fain flagged that recent talks had proved fruitless, adding that the union was not going to allow the Detroit Three car companies to "drag this out." The union and the firms are at odds over pay and employee benefits.

More work stoppages could be announced on Friday, Fain said. Walkouts at plants in Michigan, Ohio and Missouri have already halted production of popular models like the Ford Bronco, Jeep Wrangler and Chevrolet Colorado.

U.S. Treasury Secretary Janet Yellen noted that it was still too early to tell how the strikes may affect the wider economy, saying the impact may depend on how long the labor actions last.

5. Oil extends recent rise

Oil prices jumped on Tuesday, rising for the fourth consecutive session, as recent supply concerns were exacerbated by the release of a weak U.S. shale production forecast.

U.S. oil output from top shale-producing regions is on track to fall for a third month in a row in October to the lowest level since May 2023, the U.S. Energy Information Administration said in its monthly drilling productivity report on Monday.

This has added to fears of a substantial supply deficit this year stemming from the extended production cuts by Saudi Arabia and Russia.

By 05:23 ET, the U.S. crude futures traded 0.8% higher at $91.28 a barrel, while the Brent contract climbed 0.5% to $94.92. Prices have gained for three consecutive weeks, and are now hovering around 10-month highs for both benchmarks.