U.S. stock futures wavered ahead of the open on Wednesday as Wall Street awaits for the Federal Reserve’s latest interest rate decision amid of a fast-moving banking crisis.
Futures tied to the S&P 500 (^GSPC) and futures on the Dow Jones Industrial Average (^DJI) ticked up near the flatline. Contracts on the technology-heavy Nasdaq Composite (^IXIC) edged down by nearly 0.2%.
U.S. government bond yields edged up. The benchmark 10-year Treasury yield increased to 3.6%, while on the front end of the yield curve, two-year yields rose 4.1%. Oil prices dipped, with WTI crude down to $69.51 a barrel.
The Federal Reserve’s policy-making committee, headed by Chair Jerome Powell, will take center stage Wednesday. Market expectations have skewed firmly toward a 25-basis point rate hike or no move at all. The shift has been spurred by recent turmoil in the banking sector and the European Central Bank’s decision to hike rates by 50 basis points last Thursday.
Jim Reid and colleagues at Deutsche Bank believe that the “ECB’s decision last week offers a relevant blueprint for the Fed: Raise rates in line with expectations, drop forward guidance, but signal a continued tightening bias.”
This move came amid calls for central banks on both sides of the Atlantic to dial back on policy tightening in light of the banking crisis. Ahead of the U.S. policy meeting, markets are pricing in an 87% probability of a 25-basis point hike by the Fed – according to the CME FedWatch Tool.
The Fed releases its decision and economic projections at 2 p.m. ET, and Powell gives a statement and takes questions starting around 2:30 p.m. ET.
“Powell’s challenge in the press conference will be to maintain focus on fighting inflation while signaling flexibility in how they deal with the banking crisis,” Michael Feroli, Chief U.S. Economist at JPMorgan, wrote in a note to clients.
Regulators have taken pains to emphasize the banking system is stable. On Tuesday, Treasury Secretary Janet Yellen said the U.S. banking system is “sound” but additional rescue arrangements “could be warranted” if new failures pose risks to financial stability.
Bank sentiment wavered on Wednesday after surging Tuesday amid Yellen’s comments. Regional bank stocks including First Republic Bank (FRC), PacWest Bancorp (PACW), Western Alliance Bancorporation (WAL), and Regions Financial (RF) traded lower before the opening bell, while Zions Bancorporation (ZION) was up slightly.
Meanwhile, despite a $30 billion cash lifeline last week to First Republic, news reports are swirling that Wall Street executives and US officials are in talks over a new rescue plan to restore investor confidence and potentially ensure a buyer.
UBS Group AG (UBS) has offered to buy back 2.75 billion euros ($3 billion) worth of bonds that were issued days before the weekend’s forced marriage between UBS and Credit Suisse, Bloomberg reported. At the same time, Credit Suisse (CS) was ordered by the Swiss government to temporarily suspend certain forms of variable bonuses for its employees.
Here are other trending tickers on Yahoo Finance:
Nike (NKE): The sports apparel brand announced a dramatic fiscal third-quarter revenue beat of 8%, while earnings per share came in higher at 79 cents compared to expectations of 54 cents. Bloated inventory levels had been a concern for the company, but that appears to be reversing. However, shares moved lower early Wednesday.
GameStop (GME): The meme stock reported after hours Tuesday sales came in 2% ahead of estimates. The retailer posted a surprise adjusted earnings per share of 16 cents compared to analysts expectations of a loss of 15 cents per share. Shares surged more than 50%.
AMC Entertainment Holdings, Inc. (AMC): Shares are trading higher amid the strength posted by GameStop earnings. Both stocks often move in tandem, as this duo is popular among retail investors who tend to heavily short stocks.
Coinbase (COIN): Bitcoin’s rally is fueling a bounce in shares of Coinbase amid reignited interest in digital assets.
XRP USD (XRP-USD): The altcoin ripple has surged 13% in the past 24 hours to $0.45 amid ongoing case between XRP and the Securities and Exchange Commission (SEC) in the US.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv