U.S. stock futures edge down as Fed decision looms

© Reuters

By Scott Kanowsky

Investing.com -- U.S. stock futures pointed broadly lower on Wednesday, as investors looked ahead to the Federal Reserve's latest monetary policy decision.

At 07:00 ET (12:00 GMT), S&P 500 futures traded 13 points or 0.32% lower, Nasdaq 100 futures inched down 26 points or 0.22%, and the Dow futures contract slipped by 141 points or 0.41%.

The major Wall Street indexes ended higher on Tuesday to cap off strong gains in January after a torrid 2022. Expectations that a recent rate hiking cycle may be reaching its high point have helped fuel a return to stocks, particularly growth segments of the market.

The Fed is widely tipped to raise rates by 25 basis points later in the session, which would represent a downshift from a string of elevated borrowing cost increases throughout last year. The decision is expected to be published at 14:00 ET.

Fed chair Jerome Powell will also deliver comments at a press conference at 14:30 ET, with traders keen to receive any guidance about future rate hikes.

On Thursday, the European Central Bank and the Bank of England will step into the spotlight with rate announcements of their own. Both are seen increasing borrowing costs by 50 basis points.

Analysts at ING noted that traders will likely use a slew of economic data points published this week to frame their own opinions about the broader outlook, rather than rely heavily on pieces of commentary from central bankers.

"One of the reasons is that central banks are purposefully behind the curve. Their past mistake in anticipating the inflation surge means they’re unlikely to acknowledge it is going back to target until they have a much higher degree of confidence than now," the ING analysts said.

Investors will have a chance to gauge the state of the labor market in the U.S. today, with the January ADP employment report due out at 8:15 ET. Other data on job openings and the manufacturing sector are also set to come out later on, while the all-important nonfarm payrolls report will be released on Friday.

Inflation in the Eurozone slowed by more than predicted in January, according to preliminary data from Eurostat on Wednesday, although the figures only include an estimate of price growth in the bloc's biggest economy Germany. European equities hovered near the flatline, following the release of the data.

Earlier, stocks in Asia rose, driven higher by technology and consumer discretionary shares, with risk appetite being whetted by hopes of a smaller Fed rate hike.

A raft of new corporate earnings from major U.S. companies was also factoring into the wider market picture.

Snap (NYSE:SNAP) shares shed more than a sixth of their value in pre-market U.S. trading after the social media company provided a weaker-than-anticipated forecast and warned that changes to its advertising products may disrupt the business.

Other firms dependent on online advertising revenues, including Facebook-owner Meta Platforms (NASDAQ:META) and Google-parent Alphabet (NASDAQ:GOOGL), inched down as well. Meta will report its quarterly earnings after the bell on Wednesday, while Alphabet's results are due out on Thursday.

Electronic Arts (NASDAQ:EA) slashed its full-year outlook and flagged a more than month-long delay to its upcoming Star Wars title. Shares in the video game maker slumped by more than 10%.

On the other side of the spectrum, Advanced Micro Devices (NASDAQ:AMD) shares rose after the computer processor maker guided for stronger-than-predicted sales.

Elsewhere, U.S. crude futures were 0.70% higher at $79.42 a barrel by 07:00 ET, while the Brent contract gained 0.37% to $85.83 per barrel.

Additionally, gold futures dipped by 0.05% to $1,944.25/oz, while EUR/USD was up by 0.28% at 1.0892.