U.S. stock futures struggle for direction as Fed prepares to kick off policy meeting

U.S. stock index futures were little changed Tuesday, shaking off early weakness that followed a selloff in Chinese stocks as Beijing imposed new COVID-19 lockdowns.

Investors continued to monitor developments in the Russia-Ukraine war and prepared for the kickoff of a two-day Federal Reserve policy meeting that’s fully expected to conclude with a benchmark interest rate increase and will be closely watched for clues to further monetary tightening.

What’s happening
  • Futures on the Dow Jones Industrial Average

    rose 12 points, or less than 0.1%, to 32,850.

  • S&P 500 futures

    rose 0.1% to 4,168.75.

  • Nasdaq-100 futures

    were up 43 points, or 0.3%, to 13,087.

On Monday, the Dow Jones Industrial Average

rose 1 point, or 0%, to 32945, while the S&P 500

declined 31 points, or 0.74%, to 4173, and the Nasdaq Composite

dropped 263 points, or 2.04%, to 12581.

What’s driving markets

China’s at the heart of two stories that worry investors. U.S. and Chinese officials met in Rome on Monday, with little apparent agreement, as American negotiators said Russia was looking to circumvent sanctions by procuring Chinese arms. U.S. officials have threatened to also sanction China.

At the same time, China’s been fighting a coronavirus outbreak, tightening controls at ports after locking down the technology and finance hub of Shenzhen. Beijing also locked down Changchun, an auto center in the northeast, the Associated Press reported, with bus service to Shanghai, China’s business capital and biggest city, suspended

“In terms of catalysts, it is a bit of a perfect storm, with a sharp rise in COVID cases in China and implications for demand and supply chains and further worries about the China-Russia relationship and possible sanctions if China was to provide support to Russia visibly,” said Stephen Innes, managing partner at SPI Asset Management.

The Hang Seng

slumped 6% in Hong Kong, and the Shanghai Composite

dropped 5%.

The Federal Reserve kicks off its two-day meeting Tuesday, where it’s expected to make a quarter-point rate increase on Wednesday. The Fed will be eyeing U.S. wholesale inflation data due for release on Tuesday morning.

Read: Fed to hike interest rates Wednesday, undeterred by lack of visibility on Russia-Ukraine war’s impact

The Dutch bank ABN Amro is expecting seven quarter-point rate hikes this year, and another three next year.

“Despite the growth dampening effects of higher commodity prices, the conflict makes the case even stronger for rate hikes, rather than weaker,” said Bill Diviney, senior economist at ABN Amro.

Which companies are in focus?
  • Airline stocks were in the spotlight. JetBlue Airways Corp.
    Delta Air Lines Inc.
    and Southwest Airlines Co.

    all raised their first-quarter revenue outlooks on Tuesday, while United Airlines Holdings Inc.

    said it expects first-quarter total operating revenue to be near the better end of previous guidance.

  • In a surprise move, theater chain and meme-stock favorite AMC Entertainment Holdings Inc.

    said it was buying 22% of Hycroft Mining Holding Corp.

    and its 71,000 acre Hycroft Mine in northern Nevada. AMC shares rose 3%, while Hycroft shares jumped 87% in premarket action.

Read More: U.S. stock futures struggle for direction as Fed prepares to kick off policy meeting

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