US open: Stocks creep higher ahead of the Fed

US futures

Dow futures +0.2 % at 33211

S&P futures +0.2% at 4187

Nasdaq futures +0.16% at 13112

In Europe

FTSE -0.2% at 7536

Dax +0.15% at 14034

Euro Stoxx -0.24% at 3750

Learn more about trading indices

50 basis points rate hike expected

US stocks are set to open modestly higher on Wednesday ahead of the Federal Reserve’s interest rate decision later in the session, which is likely to set the tone for the markets for the coming weeks.

The market has priced in a 50 basis point rate hike, so the focus is on the outlook. How aggressive will the Fed be hiking rates and trimming its balance sheet over the coming months? This is what will dictate where the market goes from here.

The labour market remains tight, which gives the Fed leeway to front-load the rate hikes. Data revealed over 11.5 million vacancies and with ADP private payrolls adding 247k news jobs. Although this was down from 479k in March and missed the 395k forecast, it is still a solid reading.

Should the Fed adopt a more hawkish stance with more outsized rate hikes, the USD could drive higher, and stocks are likely to come under pressure. Higher borrowing costs slow earnings and growth.

In corporate news:

Advanced Micro Devices jumped 6% premarket after reporting massive sales growth in the quarter.

Airbnb is also set to rise on the open after forecasting a robust second quarter on expectations that travel will rebound this summer.

Lyft is set to fall sharply on the open after a weaker than expected outlook amid plans to spend more on driver incentives.

More news on the stocks to watch

Where next for the Nasdaq?

After rising to 15275, the Nasdaq has been trading in a falling channel, breaking below the 50 SMA and 14000 psychological levels. Sellers need to break below 12950 and 12800 to continue the bearish trend. On the flip side, any recovery would need to retake last week’s high of 13530 and the January low of 13730 to expose the 50 sma at 14000.

FX markets USD falls, EUR edges higher.

USD is edging lower for a second straight day as investors remain focused on the Fed interest rate announcement later today.

GBP/USD is rising but unconvincingly as investors await central bank decisions from both the Fed and the BoE tomorrow. There are concerns that the UK economy can’t absorb much more in terms of hikes without being pushed into a recession. These concerns are likely to keep gains in the pound limited.

EUR/USD is edging higher in lackluster trading around 1.05. News of the latest EU sanctions and weaker than excepted retail sales are limiting gains in the euro. Retail sales fell by -0.4% MoM in March after rising 0.4% in February, amid signs that record-high inflation is impacting consumer habits.

GBP/USD +0.08% at 1.2507

EUR/USD +0.06% at 1.0520

Oil jumps on EU oil embargo news.

On Wednesday, oil prices are charging higher after the EU proposed the sixth round of sanctions, including a phased oil embargo on Russia.

The Russian oil embargo would come in over six months with the exemptions for Hungary and Slovakia until 2023. Europe, which is highly dependent on Russian oil and gas, now must find alternative supplies.

The EU has finally pulled the trigger bringing into fruition what the market has been fearing since the start of the war. However, it has been done with a reasonable time frame in mind to prevent a supply shock. Even so, the latest developments will keep the oil prices on a trajectory towards $110.

Also, let’s not forget that the news comes following API data which revealed a larger than expected draw on inventories, underscoring concerns over supply.

WTI crude trades +3.5% at $105.35

Brent trades +3.4% at $108.52

Learn more about trading oil here.

Looking ahead

15:00 US ISM services PMI

18:00 Fed rate decision

How to trade with City Index

Follow these easy steps to start trading with City Index today:

Open a City Index account, or log-in if you’re already a customer.
Search for the market you want to trade in our award-winning platform.
Choose your position and size, and your stop and limit levels
Place the trade.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.