US pre-open: Futures cautiously higher ahead of FOMC decision

Wall Street futures were in the green ahead of the bell on Wednesday as investors look ahead to the outcome of the Federal Reserve's June policy meeting and another batch of inflation data.

As of 1215 BST, Dow Jones futures were up 0.09%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.12% and 0.13% firmer, respectively.

The Dow closed 120.62 points lower on Tuesday, erasing gains recorded in the previous session as the Federal Reserve’s monthly two-day policy meeting got underway.

Wednesday’s primary focus will be the outcome of that very meeting, with a rate policy decision and press conference by chairman Jerome Powell both slated for 1900 BST. The central bank was widely expected to maintain its benchmark overnight borrowing rate in a range between 5.25% and 5.5%, but the market will also be keeping a keen eye on the Fed’s Summary of Economic Projections, which could clarify the path for policy as market participants grow increasingly concerned that recent strong jobs reports and sticky inflation may support a higher-for-longer interest rate environment.

Scope Markets' Joshua Mahony said: "Jerome Powell's testimony and the economic projection will provide the backbone of this FOMC meeting, with markets keeping a close eye on any hint that September could come to soon for a rate cut. With US inflation expected to remain well above target throughout the remainder of this year, markets expectations that the Fed will cut rates twice revolve around the notion that alternate factors such as an economic slowdown or political concerns will force Powell's hand.

"This meeting will bring a fresh dot plot, which will lay out the outlook for rates over the remainder of the year. While the March dot plot laid out an expectation that we could see three cuts this year, there is a high likeliness that we see that figure shift down towards two or even just one cut by year end."

Elsewhere on the macro front, mortgage applications soared 15.6% in the week ended 7 June, according to the Mortgage Bankers Association of America, rebounding from a 5.2% drop in the previous week and erasing the prior two week’s declines. The increase came as average mortgage rates fell five basis points amid a drop in Treasury yields throughout the period. Applications to refinance a home surged 28%, while the to purchase a home increased 12%.

Still to come, May’s consumer price index will be published at 1330 BST, with economists expecting to see just a 0.1% month-on-month increase and a 3.4% rise on a year-on-year basis.

In the corporate space, Oracle shares surged in pre-market after the tech company’s announcement that it had struck deals with both Google and OpenAI offset its Q4 miss, while Rentokil Initial shares rallied on the back of news that Trian Partners had taken a significant position in the pest-control giant.

Reporting by Iain Gilbert at Sharecast.com