U.S. stock futures and Treasury yields were in a holding pattern Wednesday morning ahead of the Federal Reserve’s final monetary policy decision of the year.
Here were the main moves in markets, as of 8:36 a.m. ET:
S&P 500 futures (ES=F): +0.01%, or 0.25 points
Dow futures (YM=F): -0.12%, or 34 points
Nasdaq futures (NQ=F): +0.09%, or 7.5 points
WTI crude oil prices (CL=F): -0.51% to $58.94 per barrel
10-year Treasury yield (^TNX): -0.02 bps to 1.829%
Gold (GC=F): +0.17% to $1,470.60 per ounce
The Federal Open Market Committee’s (FOMC) December monetary policy decision is set for release at 2:00 p.m. ET, followed at 2:30 p.m. by a press conference from Federal Reserve Chair Jerome Powell.
Consensus economists expect the Fed will hold benchmark interest rates at their current band of between 1.50% to 1.75%. Market participants priced in a 97.8% probability of such an outcome as of Wednesday morning, according to CME Group, with the balance comprising a slim probability of a rate hike.
“We expect the FOMC to be on hold at the December meeting, given little change in the economic outlook and balance of risk over the inter-meeting period,” Nomura economist Lewis Alexander wrote in a note. “Incoming data remain consistent with an economy growing in or at near potential as the labor market remains strong and some industrial data have improved in recent months.
“In addition, almost all FOMC participants have publicly indicated comfort with the Committee’s current ‘wait and see’ approach as the impact of accommodation feeds into the economy,” he added.
In the six weeks since the Federal Reserve’s October meeting, U.S. economic data underscored a rebound in the manufacturing sector and ongoing resilience in the labor market and consumer spending. Durable goods orders returned to growth and IHS Markit’s manufacturing purchasing managers’ index showed a shallower contraction in the manufacturing sector.
Meanwhile, the unemployment rate returned to a 50-year low in November while inflationary pressures have remained muted, adding to the Fed’s case for keeping rates at current levels for the time being.
With economists all but certain that the Wednesday meeting will produce no change to interest rates, their focus Wednesday afternoon will instead turn to the outlook for the coming years. The Fed will release an updated Summary of Economic Projections (SEP), which will include a “dot plot” indicating where each member of the FOMC believes interest rates will be over the next several years.
Three rate cuts brought benchmark interest rates down by 75 basis points total this year, even after the Federal Reserve’s December 2018 dot plots predicted that interest rates would be between 2.75-3.00% this year. In the wake of this year’s easing cycle and subsequent rebound in economic data, whether the Fed’s next move will be to reduce or raise rates remains a point of contention for market participants.
“Dovish surprises could include a decline in the median longer run dot, greater concern about inflation misses, or explicit comments that an inflation overshoot is a necessary condition for hikes,” Goldman Sachs economist Jan Hatzius wrote in a note. “Hawkish surprises could include a somewhat larger minority of participants projecting a 2020 hike, or two hikes in 2022 to return the funds rates to neutral.”
ECONOMY: Consumer prices rise slightly more than expected in November
The Department of Labor’s headline consumer price index (CPI) registered a greater than expected increase in November as shelter price gains accelerated and prices for energy, medical care, recreation and food all rose during the month.
The broad CPI increased 0.3% month over month on a seasonally adjusted basis, higher than the 0.2% gain increase expected. In October, CPI rose 0.4% on a monthly basis. Excluding food and energy prices, the CPI rose 0.2% month over month, matching the Octobers rate and consensus expectations. This metric, which strips out more volatile categories, is seen by many economists as a better gauge of underlying price trends.
Headline CPI rose 2.1% year over year, coming in just ahead of the 2.0% expected and picking up from October’s 1.8% annual rise. CPI excluding food and energy prices rose 2.3% year on year, matching expectations and October’s pace.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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2019-12-11 13:39:00Z
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