The Federal Reserve, the U.S. central bank, is projected to maintain its key interest rate between 5.25% and 5.50% today, Wednesday. This decision comes in the wake of indicators suggesting a decline in core inflation from recent economic data. However, rising oil prices have impacted headline inflation figures, leading to speculation that the Fed may predict sustained higher rates.
The updated forecasts from the Fed are anticipated to include an additional rate increase in 2023 and improved growth for 2023/24. The aim is to stabilize inflation, but these predictions have created uncertainty regarding the trajectory of rates and potential economic impacts. This led to a market selloff on Tuesday, which was further exacerbated by a spike in Canada's inflation rate due to elevated gasoline prices and a larger-than-expected decrease in U.S. housing starts.
Financial markets have factored in a 99% likelihood that the Fed will keep rates steady and a 69% probability of no change in November, according to the CME's FedWatch tool.
In related market movements, Dow e-minis were up by 48 points (0.14%), S&P 500 e-minis were up by 6.5 points (0.14%), and Nasdaq 100 e-minis were up by 22.75 points (0.15%) as of early Wednesday morning.
A pullback in U.S. Treasury yields from their 2007 highs has helped megacap growth stocks record gains. Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN), and Tesla (NASDAQ:TSLA) saw increases ranging from 0.2% to 0.3%. On the other hand, Dollar General (NYSE:DG) shares fell by 2.2% following J.P.Morgan's downgrade from "neutral" to "underweight".
In other financial news unrelated to the Federal Reserve or market movements, Klaviyo, a marketing automation company, is expected to make its debut on the New York Stock Exchange (NYSE). This follows the firm's successful initial public offering (IPO), pricing its share sale above the indicated range and achieving a valuation of $9.2 billion. Meanwhile, Instacart shares fell by 3.9% in premarket trading after a 12% rise in their Nasdaq debut on Tuesday. Arm Holdings (NASDAQ:ARM) also experienced a decrease, with a 1.4% loss in value.
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