U.S. Interest Rate Decision; EIA Weekly Petroleum Status Report; Canada Consumer Price Index for June; McDonald's Corp. 2Q earnings; Pfizer Inc. 2Q earnings; Boeing Co. 2Q earnings; Facebook Inc. 2Q earnings; Ford Motor Co. 2Q earnings.
Stock futures ticked higher Wednesday as investors awaited fresh guidance from the Federal Reserve and another batch of earning reports from the nation's biggest companies.
The stock market is hovering near all-time highs, with investors betting on strong corporate earnings, the economic rebound, and continued support from central banks' easy monetary policies. Their optimism has been tempered in recent days by concerns about the Delta variant of Covid-19, China's regulatory crackdown and the risk of persistently high inflation.
"There is a general fishing for direction right now," said Aoifinn Devitt, chief investment officer at Moneta Group. "The strong underpinning of the market is that there is a lot of capital waiting on the sidelines, waiting for an opportunity to enter, and that means any corrections are very short lived."
The market's biggest vulnerability right now is that stocks can't trade at current valuations without continued support from the Fed, Ms. Devitt added.
Fed officials are set to conclude their two-day policy meeting on Wednesday, with a statement due to be released at 2 p.m. ET. The focus will be on any signals from Chairman Jerome Powell about whether policy makers are accelerating deliberations over how and when to pare back on their easy-money policies, and any shift in the Fed's view on inflation.
"If Powell is being honest, every economist has been surprised about how high inflation has been, and there is no sign of it coming off just yet, " said Brian O'Reilly, head of market strategy for Mediolanum International Funds. "But they are going to look through this. There will be no change, but they are at the stage where they are starting to talk about talking about tapering."
Ahead of the opening bell, Class A shares in Google's parent company, Alphabet, rose almost 2% after the technology giant said late Tuesday that its profits had surged to a record. Shares in Apple fell 0.8% after the largest American company by market value warned that its rate of growth will likely slow.
Thermo Fisher Scientific, Spotify Technology, Pfizer, McDonald's, Bristol-Myers Squibb and Boeing are among a host of large companies set to release earnings ahead of the opening bell. Facebook, Qualcomm, PayPal Holdings and Ford Motor are due to post reports after markets close.
Overseas, the Stoxx Europe 600 rose. Among individual stocks, Barclays rose almost 4% in London after the U.K. bank reported a rise in quarterly profit that surpassed analysts' expectations.
In Hong Kong, markets clawed back a small part of the deep losses accumulated over the last three sessions following a selloff fueled by growing concern about China's widening crackdowns on online platforms and other businesses.
The dollar will move materially if the Federal Reserve mentions the spread of the Delta coronavirus variant or a tapering of asset purchases in its policy statement later Wednesday, BK Asset Management said.
"If the Fed includes concerns about the Delta variant, the dollar could extend its slide quickly, and if they shrug off those worries and officially acknowledge that taper is coming, the dollar will soar," BK forex strategist Kathy Lien said.
Fed Chair Jerome Powell will be pressed to discuss both topics even if they don't make it into the policy statement, she said.
The dollar could fall if the Fed's guidance on asset purchases is left unchanged in a policy decision later Wednesday, Commerzbank said.
Many market participants expect the Fed to signal it could scale back stimulus soon by dropping the word "substantial" from its statement that it will maintain the current pace of asset purchases until "substantial further progress" has been made towards its goals, Commerzbank currency analyst Ulrich Leuchtmann said. "But that is not our house view." That means the dollar should end the day lower, Leuchtmann said.
The fall in U.K. coronavirus cases is a promising development for the pound in the near-term because it could be years before the real economic impact of Brexit becomes clear, Commerzbank said.
Leaving Brexit uncertainty aside, an abatement of the pandemic "speaks for positive real economic impulses," which should support the pound, Commerzbank currency analyst Esther Reichelt said.
"However, the Bank of England's rather dovish stance should put a stop to further significant GBP gains for the time being."
The yield on the benchmark 10-year Treasury note rose to 1.256% from 1.235% on Tuesday.
The Fed is likely to leave rates, the pace of asset purchases and guidance all unchanged at its decision on Wednesday, said UniCredit. A formal discussion about tapering asset purchases will start at the current meeting, said UniCredit, although it doesn't expect any clear hint on the timing or composition of tapering.
"There are a range of views on the FOMC regarding tapering, and it will likely take a while to build a consensus," UniCredit said.
The Italian bank's analysts add that the FOMC also wants to gather more clarity from data, while the spread of the delta variant favors caution.
Oil prices were higher, leaving both benchmarks 0.6% and 0.3% below the level at which they began the week. Gentle gains follow API inventory data released Tuesday that showed a larger than expected drawdown in U.S. crude stocks, according to OANDA's Jeffrey Halley.
Traders will watch out for EIA data released later Wednesday.
Gold prices ticked higher ahead of the Fed's monetary policy meeting while base metals were mixed. Three-month copper on the LME fell 0.6% to $9,735.50 a metric ton while aluminum rises 0.4% to $2,496 a ton.
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