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Wall St set to open lower ahead of Fed decision; AMD rises on outlook

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2023-02-01T14:06:14Z

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 27, 2023. REUTERS/Andrew Kelly

U.S. stock indexes were set to open lower on Wednesday as investors cautiously awaited the Federal Reserve’s decision on interest rates later in the day, while chipmaker Advanced Micro Devices climbed on an upbeat outlook.

The Fed is widely seen as raising its target interest rate by a quarter of a percentage point in its first policy meeting of the year, after the rapid increases in 2022 to tame decades-high inflation.

Investors will also parse Chair Jerome Powell news conference for clues on the trajectory of future rate hikes.

Money markets are betting on one more 25 basis point (bps) hike in March, and a terminal rate of 4.9% in June.

“Consensus is that the Fed is going to talk very hawkish today even though it’s only doing 25 basis points,” said Thomas Hayes, chairman at investment firm Great Hill Capital.

Recent readings have indicated that inflation is easing, with the Fed also looking at data that will determine the resilience of the labor market and the pace of wage growth.

Meanwhile, the ADP National Employment report showed that private payrolls increased by 106,000 in January, lower than expectations of 178,000 additions. It was also much lower than the 235,000 rise in the previous month.

The survey is seen as a precursor to the Labor Department’s more comprehensive reading on nonfarm payrolls for January on Friday.

“What you’re seeing here is an abrupt drop off in hiring, which implies the Fed is succeeding at what they set out to do – create increased unemployment and reduce demand, which will effectively lower inflation,” Hayes said.

On Tuesday, Wall Street indexes reversed declines and rallied when the Fed’s preferred wages gauge, the U.S. Employment Cost index, showed its smallest increase in a year during the fourth quarter.

Advanced Micro Devices Inc (AMD.O) added 3.2% in premarket trading, bucking the recent nervousness among chipmakers.

The company said it expects its business to improve in the second half of the year, boosting hopes that it is gaining on rival Intel Corp (INTC.O).

Videogame publisher Electronic Arts Inc (EA.O) slumped 9% on lowering its annual bookings forecast, as the busiest week of the current earnings season enters the mid-way mark.

Snap Inc (SNAP.N) tumbled 12.5% after the social media company said it expects current-quarter revenue to decline by as much as 10%. Other social media and internet firms like Meta Platforms Inc (META.O), Alphabet Inc (GOOGL.O) and Pinterest (PINS.N) were 0.3% to 1% lower.

Facebook parent Meta is expected to report quarterly results after the bell.

At 8:37 a.m. ET, Dow e-minis were down 138 points, or 0.4%, S&P 500 e-minis were down 9.75 points, or 0.24%, and Nasdaq 100 e-minis were down 8.25 points, or 0.07%.

Dow Jones Industrial Average component (.DJI) Amgen Inc (AMGN.O) dipped 0.6% as the drugmaker said its fourth-quarter revenue fell slightly.

Fourth-quarter earnings of S&P 500 firms are expected to decline 2.4%, as per Refinitiv estimates.


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