S&P 500 Futures Slip Ahead of Fed Rate Decision; Tech Stocks Decline

Futures linked to the S&P 500 index decreased by 0.2% in late trading on Tuesday as investors looked forward to the Federal Reserve’s policy decision for interest rates scheduled to take place tomorrow afternoon (Wednesday). In comparison, Nasdaq 100 futures dropped by 0.4%, while Dow Jones Industrial Average futures remained relatively unchanged (-8 points or -0.02%). During regular trading hours on Tuesday, the Dow and S&P 500 both saw losses of over 1%. The tech-heavy Nasdaq Composite fell more than 2%. Bond yields rose following the release of higher-than-expected employment cost index data in Q1 which reignited worries about possible future rate hikes from the Fed. For April, all three major averages experienced monthly losses with the S&P 500 and Nasdaq Composite experiencing declines exceeding 4%. The Dow saw a loss of over 5% for its worst performance since September last year (2021). In after-hours trading on Tuesday, Amazon’s shares increased by around 1%, while AMD plunged more than 6% following the release of an in-line revenue forecast for Q2. Super Micro Computer also saw a decrease in share price of approximately 9%. Trades will closely listen to Jerome Powell for signals indicating what factors could potentially lead to rate cuts, as investors remain concerned that inflation is still relatively high and may continue to be so. In addition to the Fed’s decision on interest rates tomorrow afternoon (Wednesday), traders can also expect other economic data releases such as job openings and labor turnover survey for March, ADP private employment figures due Wednesday morning, and earnings reports from several notable companies including Pfizer, Kraft Heinz, CVS Health reporting earlier in the day and Qualcomm, DoorDash publishing results tomorrow afternoon (Wednesday). The utilities sector was one of only two sectors that experienced gains during April with a 1.6% increase as NextEra Energy (+4.8%) led the way followed by Consolidated Edison’s rise of around 3.9%. Bank of America revised its forecast for Fed policy, predicting interest rate cuts to begin in December (previously June) and an increased expectation that the terminal fed funds rate will finish at a higher level than previously anticipated (+0.25%) after experiencing firmer-than-expected inflation data recently. This means BofA now expects no more than seven quarter-point reductions from the Fed, rather than nine as was predicted earlier.