The financial world is awaiting the Federal Reserve’s announcement on interest rates this Wednesday, with most investors anticipating that the central bank will maintain current borrowing costs. All eyes will then turn to remarks from Fed Chair Jerome Powell as markets seek to understand the future trajectory of monetary policy. Meanwhile, Advanced Micro Devices (NASDAQ:AMD) has revealed its sales forecast for its key AI-optimized chip in 2024.
1. Federal Reserve Decision in Focus:
Today, attention is squarely fixed on Washington, where the Federal Reserve is poised to reveal its latest decision on interest rates.
The Federal Open Market Committee of the U.S. central bank is widely expected to leave the crucial Fed funds rate untouched within a target range of 5.25% to 5.50%. This forecast is according to Investing.com’s Fed Rate Monitor Tool.
As a result, the financial community will be closely scrutinizing the Fed’s accompanying policy statement and Jerome Powell’s post-meeting press conference. Traders are eager for any hints regarding the future path of interest rates.
Powell has recently alluded to the delicate balancing act facing the Fed, as it aims to raise policy rates to curb inflation without causing broader economic strain. Powell may also address how long the Fed intends to maintain elevated rates, especially in light of a surge in U.S. Treasury yields to levels not seen in almost 16 years, which has had a significant impact on stock markets over the past two months.
“The substantial rise in longer-dated Treasury yields has led to a noticeable tightening of financial conditions,” noted analysts at ING in a recent report. “This provides the Fed with some room to observe and evaluate whether its policy measures are sufficiently restrictive to bring inflation back in line with targets.”
2. Futures Point Lower Ahead of Fed Meeting:
U.S. stock futures are indicating a lower opening ahead of the Federal Reserve’s policy announcement.
At 06:19 ET (10:19 GMT), the Dow futures contract had declined by 144 points, or 0.4%. S&P 500 futures were down by 19 points, or 0.4%, and Nasdaq 100 futures had fallen by 67 points, or 0.5%.
In the previous session, major indices on Wall Street closed higher, as investors anticipated that the Fed would maintain interest rates. These gains contributed to a nascent relief rally to close out a predominantly downbeat October. During the month, the benchmark S&P 500 and the 30-stock Dow Jones Industrial Average decreased by 1.4% and 2.2%, respectively, while the tech-focused Nasdaq Composite saw a 2.8% dip.
3. Advanced Micro Devices Unveils AI Chip Sales Forecast:
After-hours trading in Advanced Micro Devices saw fluctuations following the company’s announcement of smaller-than-expected revenue estimates for the fourth quarter. However, AMD revealed projections for the sales of its AI-optimized chip in 2024 for the first time.
AMD anticipates revenue for the current quarter to be around $6.1 billion, give or take $300 million, falling short of Reuters’ projected $6.37 billion. Adjusted gross margins are expected at 51.5%, slightly below the forecasted 52.1%.
Despite this, the company’s client business performed strongly, allowing AMD to surpass estimates with third-quarter adjusted revenue of $5.8 billion. Additionally, AMD executives informed investors that sales of their MI300 chip, a potential rival to Nvidia (NASDAQ:NVDA) in the lucrative artificial intelligence market, are projected to reach $2 billion next year.
Semiconductor manufacturer Qualcomm (NASDAQ:QCOM) is scheduled to release its latest earnings today, along with Mondelez (NASDAQ:MDLZ), the parent company of Oreo.
4. Chinese Manufacturing Contracts in October – Caixin Data:
A private survey has revealed that Chinese factory activity unexpectedly contracted in October, indicating widespread declines in the sector. This echoes findings from a government survey earlier in the week.
The Caixin manufacturing Purchasing Managers’ Index (PMI) registered at 49.5 for October, falling short of expectations of 50.8 and down from the prior month’s 50.6. A reading below 50 signifies contraction, marking the first contraction in three months for the Caixin PMI.
This decline can be attributed primarily to weakening domestic and international demand, as growth in new orders slowed for the second consecutive month. Export orders continued to decrease amidst deteriorating economic conditions in China’s major trading partners.
5. Oil Prices Inch Up as Markets Await Fed Verdict:
Oil prices inched up cautiously on Wednesday ahead of the conclusion of the latest Federal Reserve meeting. Additionally, market participants are closely monitoring developments in the Israel-Hamas conflict.
As of 06:20 ET, U.S. crude futures were trading 1.3% higher at $82.10 a barrel, while the Brent contract climbed 1.3% to $86.14. Both contracts experienced over a 1% decline in the previous session and suffered a more than 10% drop in October, marking their worst performance since May.
On Tuesday, data from the American Petroleum Institute revealed a potential 1.3 million barrel increase in U.S. oil inventories last week, slightly less than anticipated. Official figures from the Energy Information Administration are expected later in the session.
