FX.co ★ Interest Rate Concerns May Continue To Weigh On Wall Street

The major futures indexes in the U.S. are indicating a potentially lower opening for the market on Wednesday, as stocks are expected to continue their downward trend, following Tuesday's significant sell-off.

Markets are apprehensive due to concerns over the future direction of interest rates, particularly in light of the Federal Reserve's upcoming monetary policy announcement this afternoon. Although no changes to the rates are anticipated, traders will be focused on the language of the accompanying statement, as well as Federal Reserve Chair Jerome Powell's post-meeting press conference.

John Lynch, Chief Investment Officer for Comerica Wealth Management, noted that, "Yesterday's late sell-off pointed to a switch in market thinking from hoping for monetary easing to acknowledging higher rates are likely to continue." He anticipates that significant news today is likely to come from the Treasury's refunding announcement rather than the Federal Open Market Committee's decision, adding that signs of increased liquidity could aid economic demand, and risk assets, in recovering.

Even as the broader market faces downward pressure, shares of Amazon are predicted to open strong, following better-than-expected first quarter results. On Tuesday, Wall Street stocks declined progressively due to concerns about inflation and uncertainty over the Federal Reserve's decisions on interest rates, which had a negative impact on investor sentiment.

The Chicago-business barometer, a report from MNI Indicators, unexpectedly indicated an accelerated contraction in Chicago-area businesses in April. The figure dropped from 41.4 in March to 37.9 in April, the lowest level since November 2022, deeming the economic health of the area worse than expected.

Consumer confidence in the U.S., according to a report from the Conference Board, declined considerably more than predicted in April. Labor costs were also reported to have risen beyond anticipations during the last quarter, implying an increase in wage pressures.

Moving on to individual stocks, Microsoft and Amazon shares were down by 3.2 percent and 3.3 percent respectively. Apple Inc., NVIDIA Corporation, Alphabet, Meta Platforms, JP Morgan Chase, Oracle, Chevron, Bank of America, Exxon Mobil, Visa Inc and Walmart also ended the day with significant to moderate losses.

On a positive note, Eli Lilly’s stocks rose almost 6 percent after reporting better than projected quarterly earnings. 3M and PayPal also experienced an increase in their share prices, following impressive first quarter earnings and a 14 percent rise in total payment volume, respectively.

In the commodity and currency markets, crude oil futures are declining, gold is slightly up, while the U.S. dollar is trading almost unchanged against the yen and slightly up against the euro.

Most Asian stock markets fell on Wednesday due to negative cues from global markets and apprehension over the Federal Reserve’s monetary policy decision. Japanese stocks showed minor losses, while Australian shares took a more considerable hit, with the S&P/ASX 200 Index falling below 7,600 levels.The Judo Bank survey revealed that the contraction in Australia's manufacturing sector continued in April, although at a slower pace with a manufacturing PMI score of 49.6. This is an improvement from a March score of 47.3 but it still lies below the boom-or-bust line of 50 that marks the boundary between expansion and contraction.

Turning our attention to Europe, most major European markets were closed on the day with little change in the U.K's FTSE 100 Index, currently up by less than a tenth of a percent. However, it seems that the U.K's manufacturing activity started to contract at the beginning of the second quarter due to uncertain market conditions, client destocking, and supply chain disruptions. This led to the manufacturing Purchasing Managers' Index dipping to 49.1 in April from a 20-month high of 50.3 in March. Out of the five PMI components, four contracted in April with only supplier delivery times showing a positive trend.

The property sector also appeared unstable as it was reported by the Nationwide Building Society that U.K. house prices decreased unexpectedly in April reflecting affordability pressures due to rising longer-term interest rates. House prices fell 0.4 percent following a 0.2 percent decrease in March.

Meanwhile, in the U.S., April's private sector employment saw more growth than anticipated, according to a report by payroll processor ADP. Private sector employment increased by 192,000 jobs following an upwardly revised jump of 208,000 jobs in March. ADP Chief Economist Nela Richardson claims hiring in April was wide-ranging except for the information sector which showed the smallest pace of pay gains since August 2021.

In anticipation, the Institute for Supply Management is set to release a report on April's manufacturing activity and manufacturing PMI, and the Commerce Department is due to release a report on March's construction spending. Job openings for March are also expected to be reported by the Labor Department.

The energy sector is set to release a report on oil inventories for the week ended April 26th, with crude oil inventories expected to decrease by 2.3 million barrels. The Federal Reserve will also announce its latest monetary policy decision.

In terms of stock performance, shares of CVS Health are down in pre-market trading due to a weaker than expected first-quarter outcome and reduced full-year profit forecast. Similarly, Starbucks' fiscal second-quarter results missed analyst projections leading to a cut in its full-year forecast. However, Pinterest is performing well in pre-market trading due to its first-quarter results beating expectations and an optimistic second-quarter revenue forecast. Finally, Pfizer is also expected to fare well after reporting first-quarter earnings above expectations and increasing its full-year earnings guidance.