The major U.S. index futures are currently pointing to a slightly higher open on Wednesday, with stocks likely to see initial strength ahead of the Federal Reserve’s monetary policy announcement this afternoon.
Stocks may continue to benefit from optimism about the outlook for interest rates, which has helped lift the major averages to their best levels in well over a year in recent sessions.
With the Fed widely expected to leave interest rates unchanged, traders will look to the accompanying statement and projections for hints the central bank could be planning to pivot to cutting rates next year.
“The market remains steadfast in its belief that the Fed will cut rates as early as this spring, although the Fed may want to keep its options open if its campaign to quell inflation hasn’t completed the more difficult ‘last mile,’” said Quincy Krosby, Chief Global Strategist for LPL Financial.
She added, “The Fed statement in concert with the ‘dot plot,’ coupled with Powell’s comments, should offer markets more clarity and hopefully less confusion over the Fed’s path towards price stability.”
Potentially adding to the positive sentiment, the Labor Department released a report showing producer prices in the U.S. unexpectedly came in flat during the month of November.
After moving mostly higher over the past few sessions, stocks saw some further upside during trading on Tuesday. The major averages recovered from an early pullback and climbed firmly into positive territory as the day progressed.
The major averages once again finished the session at their best closing levels in well over a year. The Dow climbed 173.01 points or 0.5 percent to 36,577.94, the Nasdaq advanced 100.91 points or 0.7 percent to 14,533.40 and the S&P 500 rose 21.26 points or 0.5 percent to 4,643.70.
The strength on Wall Street came following the release of a highly anticipated Labor Department report showing U.S. consumer prices inched up in line with economist estimates in the month of November.
The Labor Department said its consumer price index crept up by 0.1 percent in November after coming in unchanged in October. The uptick matched expectations.
Excluding food and energy prices, core consumer prices rose by 0.3 percent in November after edging up by 0.2 percent in October. The increase in core prices also came in line with estimates.
The report also said the annual rate of consumer price growth slipped to 3.1 percent in November from 3.2 percent in October, while the annual rate of core consumer price growth was unchanged at 4.0 percent.
The data added to optimism about the outlook for interest rates ahead of the Federal Reserve’s monetary policy announcement.
Despite the advance by the broader markets, gold stocks showed a substantial move to the downside, dragging the NYSE Arca Gold Bugs Index down by 3.2 percent.
The continued weakness among gold stocks came amid a slight decrease by the price of the precious metal, with gold for February delivery edging down $0.50 to $1,993.20 an ounce.
Energy stocks also saw significant weakness on the day, as the price of crude oil for January delivery plunged $2.71 to $68.61 a barrel.
Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index slid by 0.4 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index both fell by 1.3 percent.
On the other hand, biotechnology stocks showed a notable move to the upside, driving the NYSE Arca Biotechnology Index up by 1.0 percent to a two-month closing high.