Dow futures slip, Fed decision in focus

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Dow futures slip; Fed decision, Microsoft/Activision merger in focus — U.S. stock futures traded in a mixed fashion Wednesday, with investors cautious ahead of the latest Federal Reserve policy decision.

By 06:50 ET (10:50 GMT), the Dow Futures contract was down 35 points, or 0.1%, while S&P 500 Futures traded 6 points, or 0.2%, higher and Nasdaq 100 Futures climbed 16 points, or 0.1%.

The main Wall Street indices posted strong gains Tuesday following the weaker-than-anticipated U.S. inflation data, with the blue chip Dow Jones Industrial Average adding nearly 150 points, or 0.4%. The broad-based S&P 500 gained 0.7% and the tech heavy Nasdaq Composite rose 0.8%, both indices hitting their highest levels since last April during the session.

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Fed to pause rate-hiking cycle?

The U.S. central bank concludes its latest two-day policy-setting meeting later Wednesday, with investors generally expecting Fed chair Jerome Powell to announce a pause to the long-running rate-hiking cycle that has seen interest rates climb by over 500 basis points in just over a year.

Bets on this being the case increased on Tuesday, helping Wall Street close higher, after data showed that headline inflation growth in the world’s largest economy cooled by more than expected in May, falling to its lowest level since early 2021.

However, at 4% the headline inflation rate is still double the Fed’s stated target, and so investors will be keen to hear what Powell says about the likelihood of further hikes as well as his views on when the Fed can start to pivot.

Microsoft-Activision merger blocked

In corporate news, earnings are due from home builder Lennar Corporation (NYSE:LEN), but most eyes will be on the tech sector after a federal court in California ruled in favor of a request from U.S. antitrust regulators to place a temporary block on the completion of Microsoft’s (NASDAQ:MSFT) $69 billion merger with Activision Blizzard (NASDAQ:ATVI).

The Federal Trade Commission has signaled that the deal, the largest ever in the video games industry, will lessen competition, a viewpoint that the two companies disagree with.

Nvidia (NASDAQ:NVDA) will also be in the spotlight after shares in the chipmaker closed higher on Tuesday, resulting in its valuation ending the day at above $1 trillion for the first time, joining a select group of companies.

Oil market to tighten “significantly” – IEA

Oil prices climbed sharply Wednesday, adding to the previous session’s strong gains after the International Energy Agency’s monthly report stated that the crude market is set to tighten “significantly” over the next few months as China’s fuel consumption rebounds and the group of major producers reduce production.

The IEA was less optimistic looking further out, saying global oil demand growth will taper off over the next few years as high prices and Russia’s invasion of Ukraine speed up the transition away from fossil fuels.

Official U.S. crude inventories are due later in the session, with traders looking to see if they confirm the American Petroleum Institute’s view that stocks rose around 1 million barrels last week.

By 06:50 ET, U.S. crude futures traded 1.4% higher at $70.42 a barrel, while the Brent contract climbed 1.6% to $75.44.

Both benchmarks climbed more than 3% on Tuesday, boosted by China’s central bank cutting a short-term lending rate as well as the soft U.S. inflation data.

Additionally, gold futures rose 0.2% to $1,961.60/oz, while EUR/USD traded 0.2% higher at 1.0810.

(Oliver Gray contributed to this item.)

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