US stock index futures climb as the Federal Reserve meeting starts
Investing.com– U.S. stock index futures edged higher Tuesday, amid raised optimism that the Federal Reserve will start its rate-cutting cycle later this week with a large reduction.
At 06:15 ET (10:15 GMT), Dow Jones Futures rose 115 points, or 0.3%, S&P 500 Futures gained 20 points, or 0.4%, and Nasdaq 100 Futures climbed 100 points, or 0.5%.
Caution over the Fed saw Wall Street suffer a muted session on Monday, although some flows into economically sensitive sectors saw the Dow hit a record high.
The Dow Jones Industrial Average rose 0.6% to a record-high close and the S&P 500 rose 0.1%, whilethe NASDAQ Composite lagged on losses in tech stocks, falling 0.5%.
Fed meeting starts; markets favor 50 bps cut
The Fed is widely expected to cut interest rates at the conclusion of a two-day meeting on Wednesday, with market expectations shifting more towards a bigger, 50 basis point cut in recent sessions.
Traders were seen pricing in a 68% chance for a 50 bps reduction and a 32% chance for a 25 bps cut, CME Fedwatch showed.
Uncertainty over the scale of the cut had spurred some volatility on Wall Street in recent sessions, although both the S&P 500 and the Dow Jones Industrial Average remained close to record highs.
Comments from Fed Chair Jerome Powell at the conclusion of the two-day Fed meeting will be studied carefully, as investors seek guidance of the likely extent of the easing cycle that could bring more interest rate cuts in the coming months.
Recent data showed that while the labor market cooled, inflation remained sticky – a trend that could complicate the Fed’s plans to cut rates further.
The economic data slate Tuesday includes the release of the latest U.S. retail sales numbers, which are forecast to have contracted month-on-month in August, potentially adding further weight to the idea of a 50 bps hike.
Intel surges on foundry plans
In the corporate sector, Intel (NASDAQ:INTC) rallied over 7% premarket after the chipmaker announced plans to spin off its foundry business, and that it will sell off part of its stake in Altera.
The plan will see Intel turn its foundry business into a unit with its own board, and will also allow the cash-burning unit to raise capital from external investors.
The move comes just a month after Intel clocked heavy share losses on disappointing quarterly earnings.
Intel also announced a deal to make a custom chip for Amazon’s (NASDAQ:AMZN) web services unit.
Shares of Microsoft (NASDAQ:MSFT) rose 2% after the software giant announced a $60 billion share buyback program, and also hiked its quarterly dividend by 10%.
Crude slips ahead of API data
Crude prices slipped lower Tuesday after previous gains caused by the disruption to U.S. output in the wake of Hurricane Francine, ahead of the latest figures of the country’s crude stockpiles.
By 06:15 ET, the Brent contract dropped 0.5% to $72.42 per barrel, while U.S. crude futures (WTI) traded 0.4% lower at $68.78 per barrel.
Both contracts settled higher on Monday in the aftermath of the latest hurricane to impact the Gulf of Mexico crude-producing region, and as traders awaited the start of an easing cycle by the U.S. Federal Reserve.
More than 12% of crude production and 16% of natural gas output in the U.S. Gulf of Mexico remained offline, according to the U.S. Bureau of Safety and Environmental Enforcement on Monday.
The American Petroleum Institute is set to reveal its weekly inventory data later in the session, ahead of the official figures on Wednesday, and traders are expecting another drop in U.S. crude stockpiles.
(Ambar Warrick contributed to this article.)