Stock futures drift higher as traders brace for Fed decision

U.S. stock futures edged higher Wednesday morning, with investors looking ahead to the Federal Reserve’s latest monetary policy decision against the backdrop of elevated inflation and a still-tight U.S. labor market.

Contracts on the S&P 500, Dow and Nasdaq each rose in pre-market trading. Treasury yields steadied, and the benchmark 10-year yield hovered just below 3%, or near its highest level since late 2018.

Investors are awaiting the Federal Reserve’s monetary policy statement and press conference from Chair Jerome Powell later Wednesday afternoon. The central bank is widely expected to raise interest rates by 50 basis points for the first time since 2000. Such a hike would be double the 25 basis-point increase the Fed unleashed in mid-March, which itself had been the first rate hike since 2018. This would bring the target range for the federal funds rate between 0.75% and 1.00%, compared to the current range of between 0.25% and 0.50%.

Expectations for this supersized rate hike have built for weeks now amid market participants, especially given commentary from key Federal Reserve officials appearing to support such a move. Powell said during a public appearance with the International Monetary Fund earlier this month that he believed it would be “appropriate … to be moving a little more quickly” on raising rates, and that 50 basis points were “on the table” for May. And the Fed is also expected to use the May meeting to announce the start of quantitative tightening, or rolling assets off the central bank’s $9 trillion balance sheet.

Prospects of higher interest rates have stirred up volatility in equity markets, which had grown accustomed over the past two years to ultra-low interest rates and generally easy-money monetary policies. At the same time, however, many pundits have suggested the Fed allowed its pandemic-era supportive policies to run too long, allowing inflation to soar to the fastest rates since the 1980s. And after GDP growth turned negative in the U.S. in the first three months of the year, a lingering question remains whether the Fed will now be able to tighten policies without tipping the economy into a deep downturn.

“Because the market has priced in a 50 basis point rate hike at the Federal Reserve’s May meeting, the focus will immediately shift to just how many half-point hikes the Fed expects to initiate over the balance of 2022,” Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence, wrote in an email Tuesday. The Fed would shock markets if it failed to deliver on more aggressive policy via a 50 basis point rate hike on Wednesday.”

“The Federal Reserve’s credibility is on the line, given the surge in inflation, which has proved to be anything but transitory,” Booth added. “Interest rates are too low and markets have been way too accustomed to almost unlimited liquidity from the Fed’s bond purchases. Powell’s greatest folly would be to insist that the economy is very strong in the face of overwhelming evidence that it is slowing and slowing fast.”

7:39 a.m. ET: Uber posts better-than-expected quarterly results, guidance

Uber (UBER) posted estimates-topping first-quarter results and current-quarter guidance Wednesday morning, with the ride-hailing company signaling it was working through driver shortages while maintaining solid profitability.

Revenue more than doubled during the first quarter to reach $6.9 billion, topping estimates for $6.1 billion, according to Bloomberg-compiled data. Adjusted EBITDA increased to $168 million, also coming in ahead of the $135 million expected. Trips during the first quarter increased by 18% over last year to reach 17.1 billion, underscoring the ongoing recovery in rider demand.

For the current quarter, Uber said it sees gross bookings coming in between $28.5 million and $29.5 billion, and adjusted EBITDA of between $240 million and $270 million.

Uber shares pared losses in early trading following the results. Earlier during the overnight session, Uber shares had slumped in sympathy with Lyft’s stock, which slid after the ride-hailing company offered a current-quarter revenue and profit forecast that fell short of analyst expectations.

Uber was previously scheduled to report its quarterly results after market close on Wednesday, but after Lyft’s report, “rescheduled to provide a more timely update on the company’s performance and guidance before the market opens,” according to a statement.

7:29 a.m. ET Wednesday: Stock futures gain

Here’s where markets were trading ahead of the opening bell

  • S&P 500 futures (ES=F): +16.75 points (+0.4%) to 4,186.00

  • Dow futures (YM=F): +122 points (+0.37%) to 33,155.00

  • Nasdaq futures (NQ=F): +44.75 points (+0.34%) to 13,132.25

  • Crude (CL=F): +$3.88 (+3.79%) to $106.29 a barrel

  • Gold (GC=F): -$4.30 (-0.23%) to $1,866.30 per ounce

  • 10-year Treasury (^TNX): +0.4 bps to yield 2.962%

6:01 p.m. ET Tuesday: Stock futures open mixed

Here’s where markets were trading Tuesday evening:

  • S&P 500 futures (ES=F): +1.5 points (+0.04%) to 4,170.75

  • Dow futures (YM=F): -2 points (-0.01%) to 33,031.00

  • Nasdaq futures (NQ=F): +22.75 points (+0.17%) to 13,110.25

NEW YORK, NEW YORK - APRIL 28: Traders work on the floor of the New York Stock Exchange (NYSE) on April 28, 2022 in New York City.  The Dow Jones Industrial Average was up in morning trading as markets continued to move through a period of volatility over inflation concerns and the war in Ukraine.  (Photo by Spencer Platt/Getty Images)

NEW YORK, NEW YORK – APRIL 28: Traders work on the floor of the New York Stock Exchange (NYSE) on April 28, 2022 in New York City. The Dow Jones Industrial Average was up in morning trading as markets continued to move through a period of volatility over inflation concerns and the war in Ukraine. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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