By JOE McDONALD and MATT OTT
AP Business Writers
U.S. futures dipped Wednesday ahead of the Fed’s 19-member policy committee meeting, where benchmark interest rates are expected to be lifted to the highest level in about 15 years.
Futures for the S&P 500 dipped 0.2% before the bell, while the Dow Jones Industrial Average gave up 0.4%.
Most economists expect the Fed to raise its benchmark lending rate by 0.25 percentage points Wednesday, and Wall Street hopes that it’s the last.
After multiple three-quarter and half-point hikes last year, there has been broad concern that the Fed’s aggressive actions to cool inflation might tip the global economy into recession. So far, there has been little evidence that a downturn is imminent, outside of layoffs in the tech sector, which underwent a massive hiring boom during the pandemic.
Investors are hoping the Fed declares victory and starts rolling back rate increases late this year despite repeated warnings from Chair Jerome Powell that the cost of borrowing could be kept high for an extended period.
That has taken a toll. The Conference Board reported Tuesday that its consumer confidence index slipped in the first month of the year.
Inflation, of course, is a global phenomenon and on Wednesday new data showed that Europe’s inflation rate dipped at the start of the year, giving some relief to consumers. But prices remain elevated, prompting a number of protests, and will likely press the European Central Bank into another interest rate hike Thursday.
Wall Street’s benchmark S&P 500 index gained 1.5% after data showed U.S. wage growth slowed in late 2022. Traders took that as a sign the Fed might decide its effort to slow economic activity is taking effect.
Powell’s comments, to be made after the Fed meeting, will be picked apart for any clues of what to expect heading into 2023.
“A hawkish decision could put strong pressure on all asset classes,” said Anderson Alves of ActivTrades. A more dovish outlook could “prompt expectations that the Fed could start cutting rates again in the last quarter of this year.”
The latest round of corporate profit reports have been mixed and a slate of big tech earns are on the way. Facebook parent Meta reports after the bell Wednesday, followed by Alphabet, Amazon and Apple on Thursday, as well as Ford and Starbucks.
In midday European trading, the FTSE 100 in London, Frankfurt’s DAX and the CAC-40 in Paris each added 0.2%.
In Asia, the Shanghai Composite Index gained 0.9% to 3,284.92 after two surveys showed Chinese factory activity increased in January but still is subdued amid weak global demand and COVID-19 outbreaks that disrupted business.
The Nikkei 225 in Tokyo advanced less than 0.1% to 27,346.88.
The Hang Seng in Hong Kong added 1% to 22,072.18 after economic output shrank in the final three months of 2022 but at a slower pace than in the previous quarter. For the full year, the economy contracted by 3.5% but activity was improving after anti-virus controls were lifted.
The Kospi in Seoul rose 0.4% to 2,433.39 after data showed South Korea’s exports plunged 16.6% from a year earlier in January. December industrial production fell 2.9% from the previous month.
Sydney’s S&P-ASX 200 was 0.3% higher at 7,501.70. India’s Sensex gained 0.6% to 59,909.00. New Zealand and Southeast Asian markets rose.
In energy markets, benchmark U.S. crude rose 53 cents to $79.40 per barrel in electronic trading on the New York mercantile Exchange. The contract gained 97 cents on Tuesday to $78.87. Brent crude, the price basis for international oil trading, advanced 34 cents to $85.80 per barrel in London. It fell 41 cents the previous session to $84.49.
The dollar declined to 129.74 yen from Tuesday’s 130.21 yen. The euro edged up to $1.0898 from $1.0865.
On Wall Street, futures for the S&P 500 and the Dow Jones Industrial Average were down 0.2%.
The S&P 500 rose 1.5% on Tuesday. The Dow added 1.1% and the Nasdaq closed 1.7% higher.
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McDonald reported from Beijing; Ott reported from Washington.
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