Pre-Market Brief: Stocks Mixed Ahead of Fed Rate Decision

Morning Markets

December S&P 500 futures (ESZ22) are up +0.12% this morning after three major US benchmark indices slid during the regular session as traders prepared for another large interest rate increase from Federal Reserve policymakers, while the yield on two-year U.S. Treasury notes advanced to nearly a 15-year high. Three major U.S. stock indexes were weighted down primarily by losses in the Basic Materials, Financials, and Consumer Services sectors.

Today, all eyes are focused on the Fed's interest rate decision at the end of a two-day policy meeting. Economists, on average, forecast the new interest rate to be 3.25%, implying a 75 basis point rate increase. At the same time, U.S. rate futures have priced in an 82% chance of a 75 basis point rate hike and an 18% chance of a full 100-basis-point hike.

"Investors are just selling the Fed. All of the bad that was ignored, we're getting all of that back. People are pessimistic," said Jake Dollarhide, a chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. 

The focus will also be on new economic projections, due to be published alongside the Fed's policy statement. 

"The post-meeting commentary and the updated dots will be key," said Taylor Nugent, a markets economist at National Australia Bank.

Also, investors are likely to focus on the U.S. Existing Home Sales data, which was at 4.81M in July. Economists foresee the new figure to be 4.70M.

U.S. Crude Oil Inventories data will be reported today as well. Economists forecast this figure to come in at 2.161M, compared to the previous value of 2.442M.

In the bond markets, United States 10-Year rates are at 3.522%, down -1.43%.

The Euro Stoxx 50 is up +0.03% this morning as investors digest another extensive interest rate hike by the Fed, likely restraining growth in the world’s largest economy. However, those gains are likely to be fragile. European stocks have received a negative handover from Wall Street and Asia amid rising concerns that the Federal Reserve could have a more aggressive tone than expected today. An additional negative factor for European shares is Vladimir Putin's announcement of partial military mobilization, which is Moscow's first mobilization since World War Two.

U.K. Public Sector Net Borrowing data were released today. 

U.K. August Public Sector Net Borrowing stood at 11.06B compared to the last month's figure of 2.11B and weaker than expectations of 8.20B.

Asian stock markets today settled in the red. China’s Shanghai Composite Index (SHCOMP) closed down -0.17%, and Japan’s Nikkei Stock Index (NIK) closed down -1.36%.

China’s Shanghai Composite today closed down as investors awaited another interest rate hike from the Federal Reserve. In addition, the European Chamber of Commerce raised concerns over the country’s viability as an investment destination due to continued COVID-19 lockdowns.

At the same time, Japan’s Nikkei Stock Index closed lower today and hit a new 1-month low, weighed down by losses in the Power, Real Estate, and Shipbuilding sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.09% to 21.25.

The Bank of Japan began a two-day monetary policy meeting on Wednesday, maintaining its bond buying program. The Bank of Japan plans to buy 150 billion yen of debt in the 5-10 year area and 100 billion yen of securities with maturities of 10-25 years.

Pre-Market U.S. Stock Movers

Velodyne Lidar Inc (VLDR) gained over +3% in pre-market trading after JPMorgan initiated coverage with an underweight rating and no price target.

Micron Technology Inc (MU) fell about -2% in pre-market trading after Stifel initiated coverage of the company with a hold rating and a $56 price target.

Tellurian Inc (TELL) plunged more than -3% in pre-market trading after the company announced last night that it has withdrawn its proposed public bond offering needed to fund the project. The company will seek equity partners to fund its Driftwood LNG project.

Stitch Fix (SFIX) dropped more than -4% in pre-market trading after the company announced a larger-than-expected loss in FQ4 and issued soft guidance for the year ahead.

Shuttle Pharmaceuticals Inc (SHPH) fell about -4% in pre-market trading after the company signed a manufacturing agreement for Ropidoxuridine.

Today’s U.S. Earnings Spotlight: Wednesday - September 21st

General Mills (GIS), Lennar (LEN), Lennar B (LENb), Polyus ADR (OPYGY), Aspen (AZPN), Endava (DAVA), Sprott Physical Gold and Silver Trust (CEF), H B Fuller (FUL), KB Home (KBH), Nexters (GDEV), Steelcase (SCS), Aurora Cannabis (ACB), Skillsoft Corp Class A (SKIL), Cognyte Software (CGNT), Mesabi Trust (MSB), Niocorp Developments (NIOBF), Bridgford (BRID), Renalytix AI Nas (RNLX), TAAT Global Alternatives (TOBAF), PharmaCyte Biotech (PMCB), S&W Seed (SANW), Espey Mfg&Electronics (ESP), US Gold (USAU), Forward Pharma A S (FWP), Applied Genetic (AGTC), Akso Health DRC (AHG), Sears (SHLDQ), Coffee Holding (JVA), Aytu BioScience (AYTU), Truett-Hurst (THST), Christopher Banks (CBKCQ), Bon-Ton Stores (BONTQ), Inventiva (IVA).

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