Dow futures rise 240 pts; relief rally continues ahead of Fed meeting

© Reuters

By Peter Nurse    

Investing.com -- U.S. stocks are seen opening higher Tuesday, carrying on the previous session’s relief rally ahead of the start of the Federal Reserve’s latest monetary policy deliberations. 

At 07:00 ET (11:00 GMT), the Dow futures contract was up 240 points, or 0.8%, S&P 500 futures traded 24 points, or 0.6%, higher and Nasdaq 100 futures climbed 35 points, or 0.3%.

The main averages closed higher on Wall Street Monday on hope the turbulence in the global banking sector could be contained after the takeover of Credit Suisse (SIX:CSGN) by its Swiss rival UBS (SIX:UBSG) and the announcement of additional liquidity by the Federal Reserve.

The blue-chip Dow Jones Industrial Average gained nearly 400 points, or 1.2%, the broad-based S&P 500 rose 0.9%, while the tech-heavy Nasdaq Composite closed 0.4% higher.

Also helping the tone is the expectation that the Federal Reserve – which starts its latest two-day policy-setting meeting later in the session – will agree to a slower pace of tightening than previously expected as the banking turmoil is likely to work against inflationary pressures.

European Central Bank President Christine Lagarde made the point on Monday, saying "clearly financial stability tensions might have an impact on demand and might actually do part of the work that would otherwise be done by monetary policy and interest rate hikes."

Most traders now see the Fed raising rates by a dovish quarter of a percentage point, while about a quarter of futures traders see no move at all. 

The main economic numbers due Tuesday are existing home sales for February, at 10:00 ET (14:00 GMT), with analysts expecting the annual number to be 4.19 million, up slightly from the prior month, but the month-to-month increase to be 5%, compared with the prior drop of 0.7%.

The banking sector will remain in focus Tuesday, with First Republic Bank (NYSE:FRC) stock over 20% higher after Bloomberg reported on Monday that federal authorities are looking at ways to temporarily expand insurance to all deposits in the banking system. 

Separately, the Wall Street Journal reported that JPMorgan (NYSE:JPM) CEO Jamie Dimon is leading talks with the chiefs of other big banks about fresh efforts to stabilize the troubled lender.

In terms of earnings, athletic apparel maker Nike (NYSE:NKE) and game retailer GameStop (NYSE:GME) are both due to report during the session.

Oil prices rose Tuesday, bouncing after recent hefty losses but confidence remains frail after a week of turmoil in the banking sector and ahead of a Federal Reserve interest rate decision this week.

The American Petroleum Institute is scheduled to release its estimate of U.S. crude inventories later in the session. They rose by just over 1 million barrels last week, resuming their climb after a one-week decline.

The API numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.

By 07:00 ET, U.S. crude futures traded 1.1% higher at $68.54 a barrel, while the Brent contract climbed 0.9% to $74.48. The benchmarks fell to 15-month lows at the start of the week.

Additionally, gold futures fell 0.6% to $1,970.15/oz, while EUR/USD traded 0.4% higher at 1.0759.