U.S. stock futures steady on eve of half-point Fed hike

What’s driving markets

The Federal Open Market Committee on Tuesday kicks off its two-day meeting, that is expected to end in its first half-point rate hike since 2020, as well as the launch of its quantitative tightening policy of selling bonds.

Both stocks and bonds suffered a miserable April, with the S&P 500 sliding nearly 9% and the JPMorgan U.S. Aggregate Bond ETF
JAGG,
-0.63%
dropping 4%.

“Perhaps one of the most interesting shifts seen over the first four months of the year is a move from a market being backstopped by a ‘Fed put’, where ‘buying the dip’ was an infallible strategy, to one operating with a ‘Fed call’, with selling into strength ruling the roost,” said Michael Brown, head of market intelligence at Caxton.

“Such a ‘Fed call’ comes about as a result of policymakers actively wanting to see a tightening in financial conditions, as noted by Chair Powell himself at the last press conference.”

A reminder that not just the Fed is tightening came from the Reserve Bank of Australia, which started its rate-hike cycle with a 25-basis point increase. The Bank of England meets Thursday and also is expected to lift rates.

Corporate earnings season rolls on with results from companies including Pfizer
PFE,
-1.49%,
Biogen
BIIB,
-0.06%,
and after the close, Advanced Micro Devices
AMD,
+5.05%
and Starbucks
SBUX,
+0.98%.

Market participants might also be discussing the political, and therefore economic, consequences of the reported draft ruling that would overturn the landmark Roe vs. Wade decision that legalized abortion.