Stock futures rose Wednesday following another wild session for the market as investors await results from a Federal Reserve meeting expected to set the tone for 2022.
Dow Jones Industrial Average futures climbed about 330 points, or 1%. S&P 500 futures added 1.3%. Nasdaq 100 futures gained 2%.
Microsoft shares rose 4.3% in early morning trading after the company issued better-than-expected quarterly revenue guidance. Boeing was marginally higher after the aircraft maker reported positive cash flow for the first time since 2019, but took a $3.5 billion pre-tax charge on its 787 Dreamliner program.
The Fed is set to conclude its two-day policy meeting Wednesday and make an announcement in the afternoon. The central bank is not expected to make any policy changes, but investors will look for clues on when — and by how much — the Fed will raise interest rates later this year. Market participants will also look for hints on further steps the Fed will take to unwind pandemic-era aid.
Recent market volatility is unlikely to deter the Fed from implementing as much as four or more interest rate hikes this year.
“While significant stock market volatility leading up to an FOMC meeting would normally weigh on Fed policy and commentary, that is not the case this time around, given the extreme levels of inflation seen in recent months,” said Danielle DiMartino Booth, head of Quill Intelligence and former advisor to then-Dallas Fed President Richard Fisher.
“Optically, it’s better for the Federal Reserve to ignore the stock market volatility, which is mainly affecting wealthy investors, and instead focus more on taming inflation, which is primarily affecting Main Street,” Booth added.
U.S. stocks are coming off a second consecutive roller coaster session.
The Dow ended the regular trading day Tuesday down 66 points, or 0.2%. However, the 30-stock average was down as much as 818.98 points on the session and briefly traded up by as much as 226.54 points. Those moves came a day after the Dow recovered from a 1,115-point deficit to post a slight gain.
The S&P 500 and Nasdaq Composite also closed well off their session lows on Tuesday, but still lost 1.2% and 2.3%, respectively.
Anu Gaggar, global investment strategist at Commonwealth Financial Network, said this sharp volatility is a byproduct of investors bracing for tighter monetary policy from the Fed.
“The market is exhibiting withdrawal symptoms as it is dealing with the possibility of the removal of the Fed put,” Gaggar said. “It almost feels like the market is behaving a little incoherently, not knowing which way to go – go down because the Fed is tightening or go up because the Fed is finally acting to rein in inflation and is loading up on ammunitions while economic growth remains strong.”
“Between rate hikes and tapering the $9 trillion balance sheet, we could be looking at a monetary regime that is changing quickly,” Gaggar said.
Treasury yields have jumped sharply to start the year in anticipation of tighter monetary policy from the Fed. Last week, the benchmark 10-year note yield briefly broke above 1.9%. Yields nudged higher across the curve Wednesday morning, with the 10-year near 1.79%.