By Sam Boughedda
Investing.com – Stocks surged on Tuesday ahead of the Federal Reserve’s decision on interest rates as oil prices plunged for a second day this week.
The Fed is largely expected to raise rates a quarter point when it announces its latest policy moves tomorrow afternoon, followed by a press conference by Chair Jerome Powell, who may be able to shed more light on the Fed’s approach to rates given the turmoil caused by Russia’s war on Ukraine.
The central bank has to strike a delicate balance between fighting inflationary pressures and acting patiently so as not to trigger a slowdown, as soaring energy prices have put a damper on consumer sentiment.
Analysts will focus on the Fed’s projections for how far it will have to raise rates to tamp down inflation.
Reuters reported that data on Tuesday showed U.S. producer prices rose solidly in February, both for the year and month.
Oil prices are in retreat, down another 6% on Tuesday amid a surge in Covid cases in China, which is locking down regions that include manufacturing centers. That threatens to curtail growth, driving the per-barrel price of crude back below $100.
The North Atlantic Treaty Organization is holding a meeting next week, calling on the leaders of member states such as President Joe Biden to convene over the escalating Ukraine situation.
Here are three things that could affect markets tomorrow:
1. Airline stocks
U.S. airline stocks are in for a comeback after several carriers raised revenue forecasts on stronger demand and travel rebounds. Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), United Airlines (NASDAQ:UAL), American Airlines (NASDAQ:AAL) and JetBlue Airways Corp (NASDAQ:JBLU) all rallied on Tuesday.
2. Oil continues to fall
Oil prices continued their tumble for a second straight day, with both U.S. crude and global benchmark Brent tumbling as much as 8% on Tuesday before pulling back some. The drop is even more precipitous — at more than 20% — when compared to the 14-year highs of above $130 a barrel attained by both benchmarks just over a week ago.
3. Fed statement
Of course it’s been well-telegraphed that the Federal Reserve is going to raise rates tomorrow, and likely by a quarter-point. That’s half the amount people were thinking just a few weeks ago, before Russia attacked Ukraine. But people will be listening for what the Fed has to say about the outlook now that war has broken out and the economic picture has gotten cloudier.