Dow Poised to Rise 200 Points, Fed Decision Looms—and What Else Is Happening in the Stock Market Today

view original post

Fed Chair Jerome Powell is due to speak Wednesday after the FOMC decision.

Kevin Dietsch/Getty Images

Wall Street was set for a buoyant open Wednesday to follow global stocks higher, as investors keenly await a key decision from the U.S. Federal Reserve, and fears of contagion from indebted Chinese property developer Evergrande stabilized.

Futures for the Dow Jones Industrial Average indicated an open 170 points higher, after the index slipped 50 points Tuesday to close at 33,919. Futures for the S&P 500 and Nasdaq indicated a similarly strong open after a rally Tuesday failed to end with consolidated gains.

Overseas, the Shanghai Composite rose 0.4% and the pan-European Stoxx 600 was 0.8% higher.

Investor attention is focused on the decision due later today from the Fed’s monetary policy-making body, the Federal Open Market Committee, and Fed Chair Jerome Powell’s subsequent statement.

The Fed is considering slowing, or tapering, its Covid-19 pandemic-era program of monthly asset purchases, which add liquidity to markets. Any indication that a taper will come sooner rather than later has the potential to wobble stocks.

Officials at the central bank will also update their projections of future interest rates and inflation.

Jim Reid, a strategist at Deutsche Bank , said the group’s economists “see Powell maintaining optionality about the exact timing of that announcement, but they think that the message will effectively be that the bar to pushing the announcement beyond November is relatively high in the absence of any material downside surprises.”

Fears centered on China Evergrande Group , the world’s most indebted property developer whose looming failure threatens to spill beyond China, remained, but appeared to stabilize. Chinese markets returning from a two-day break didn’t crash, as some had expected.

“There appears to be an acceptance that an Evergrande failure is more a matter of when and not if,” said Michael Hewson, an analyst at broker CMC Markets. “The real question is how any fallout is managed, with the focus now on tomorrow’s overseas bond payment deadline, after the company missed some loan repayments earlier this week.”

Reid of Deutsche Bank noted that the Chinese central bank had increased its short-term cash injections into the economy, adding 90 billion yuan ($13.9 billion) into the system.

Fears of the U.S. hitting its debt ceiling quelled, after the House passed legislation Tuesday that would fund the government through Dec. 3 and extend the debt limit until after the 2022 midterm elections.

Write to editors@barrons.com