The Wednesday Market Minute
- U.S. stock futures suggest a flat open on Wall Street as investors trim bets on a major interest rate move in July after a series of speeches from Federal Reserve officials.
- The U.S. dollar bounces from three-month lows, while gold eases from six-year highs, as 50 basis point cut bets fade as Fed Chair Powell pushes back on market and political pressures.
- Global oil prices surge as investors react to a much bigger-than-expected U.S. crude build-up and worrying rhetoric between Washington and Tehran.
- Wall Street futures suggest a modest opening bell gain for the Nasdaq following stronger-than-expected earnings from Micron, while both the Dow and the S& 500 are expected to open little-changed from their Tuesday closing levels.
U.S. stocks are set for a firmer open Wednesday, with stronger-than-expected tech earnings boosting the Nasdaq while a series of comments from the Federal Reserve trimmed hopes of a big July rate cut, holding down gains for the other Wall Street benchmarks.
Fed Chairman Jerome Powell told a Council on Foreign Relations event in New York Tuesday that the central bank was "insulated" from political and market pressures as it debated its next move on interest rates, adding he and his Open Markets Committee colleagues were "grappling" with the varying uncertainties surrounding growth, inflation and global trade.
"The Fed is insulated from short-term political pressures -what is often referred to as our 'independence," Powell said. ""The question my colleagues and I are grappling with is whether these uncertainties will continue to weigh on the outlook and thus call for additional policy accommodation."
Powell's remarks were preceded by comments from St. Louis Fed President James Bullard, the most dovish of the FOMC's voting members, who told Bloomberg Television that a 50 basis point rate cut it July would likely be "overdone" given the underlying strength of the U.S. economy.
Collectively, the Fed's Tuesday messaging cast doubt on a major rate move when the central bank meets next on July 30 and July 31, with CME Group futures prices now suggesting a 27% chance of a 50 point reduction, down form 42% earlier this week. A 25 basis point cut, which would pull the Fed Funds target rate to a range of 2% to 2.25%, is now fully-priced-in for the July meeting.
With the Fed attempting to manage expectations on rates, and U.S. officials downplaying expectations for this weekend's G20 Summit meeting between President Donald Trump and Xi Jinping in Osaka, investors were once again left to favor safer assets over risk, even as the dollar bounced from a three-month low and oil shot up after a bigger-than-expected build in U.S. crude inventories.
U.S. stocks were given a modest boost, however, by stronger-than-expected third quarter earnings from semiconductor maker Micron Technologies (MU - Get Report) , which also said it had resumed shipments to China-backed Huawei Technologies and stuck to its forecast of a second half rebound in the memory chip market, sending its share more than 8.5% higher in pre-market trading.
The looks to bump the tech-focused Nasdaq Composite index into a modest 18.2 point gain, according to early equity futures prices, while both the Dow Jones Industrial Average and the broader S&P 500 are expected to open little-changed from their Tuesday session declines.
The American Petroleum Institute said Tuesday that U.S. crude stocks rose 7.5 million barrels over the week ending on June 21, far exceeding the market's expectation of a 2.2 million decline, sending global oil prices to fresh one-month highs as investors also priced in the risk of an escalating conflict between Washington and Tehran as the two nations traded threats and insults following last week's downing of an unmanned U.S. military drone and the late-hour cancellation of a Trump-ordered airstrike.
Brent crude contracts for August delivery, the global benchmark, were seen 84 cents higher from their Tuesday close in New York and changing hands at $65.89 per barrel in early European trading. WTI contracts for the same month, which are more tightly linked to U.S. gas prices, were marked $1.02 higher at $58.85 per barrel.
Overnight in Asia, the U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.4% higher from yesterday's three-month low as traders reacted to the Fed's pushback on rates, while benchmark 10-year Treasury notes hovered around the 2% threshold ahead of two major 5-year and 7-year bond auctions later this week.
Asia region-wide MSCI ex-Japan index was marked 0.1% lower heading into the final hours of trading, while a still-firm yen, which is holding near a six-month high against the dollar, kept the Nikkei 225 from climbing into the green as it closed 0.51% lower at 21,086.59 points.
European stocks were also modestly weaker at the start of trading with the Stoxx 600 benchmark slipping 0.25% and Britain's FTSE 100 notching a 0.13% pullback.