Investors are understandably adopting a cautious posture ahead of the release of the interest rate decision from the central bank's policy makers today.
“It’s been some time coming but it seems the markets are finally waking up to the idea that the Fed could raise interest rates before the end of the year, even more than once,” suggested Craig Erlam at forex trading platform operator OANDA.
Erlam is not suggesting the Federal Open Market Committee (FOMC) will announce a surprise hike today, but draws attention to recent comments from Federal bank presidents John Williams, Dennis Lockhart and Robert Kaplan (none of whom have a vote on the FOMC this year), all of which appeared to be “on message” with the idea of an increase before the year is out.
“The FOMC minutes, released later on today, will now be even more important as investors look for further signs that future rate hikes have been incorrectly priced by the markets and that June is actually a live meeting. Until yesterday, the implied probability of a hike was only 4% with investors absolutely convinced that this was off the table. Already this has risen to 15% and the timing of the next hike brought forward to November, from December. If the minutes echo the comments from Fed officials as of late, we could see the markets come even more in line with what the Fed’s plans,” Erlam suggested.
With that uncertainty in mind, spread betting punters are expecting the S&P 500 to add to yesterday's heavy losses, and open a couple of points down from last night's close of 2,047.
The Dow Jones average is expected to just about keep its head above 17,500, opening at around 17,505, down 25 points.
On the corporate front, a number of heavy hitters are scheduled to update the market today, including clothes seller American Eagle Outfitters (NYSE:AEO), networking giant Cisco Systems Inc (NASDAQ:SCSO) and customer relationship management systems software specialist Salesforce.com Inc (NYSE:CRM), all of which are expected to spill the beans after the market closes.
Already out on the wire are results from retailers Staples Inc (NASDAQ:SPLS), Lowe's Companies Inc (NYSE:LOW) and Target Corporation (NYSE:TGT). The first two are both firmer in pre-market trading.
Later today there will be the weekly update on crude oil inventories that could stop crude's recent rally in its tracks or add more fuel to the fire.