US pre-open: Futures head south as traders look ahead to FOMC decision

Wall Street futures were in the red ahead of the bell on Tuesday as market participants awaited the beginning of the Federal Reserve's two-day policy meeting.

As of 1210 GMT, Dow Jones futures were down 0.32%, while S&P 500 and Nasdaq-100 futures had the indices opening 0.29% and 0.41% weaker, respectively.

The Dow closed 260.99 points lower on Monday, easily reversing gains recorded in the previous session as market participants geared up for a busy week of earnings season.

Despite Monday's losses, all three major indices are still tracking for monthly gains going into the final day of January, with the Nasdaq Composite on pace for its best monthly performance since July 2022. However, with several major earnings updates and the Federal Reserve's interest rate decision all set to be revealed before the end of the week, Wall Street's recent rally could be at risk.

Markets.com's Neil Wilson said: "Two-thirds of stocks above their 200-dma, A/D line in positive territory, year-long trend line broken -it's all looking quite bullish but the S&P 500 fell 1.3% as investors started to show some fear ahead of the Federal Reserve meeting. There is genuine doubt among bulls here – they know the Fed can drive a horse and coaches through their recovery by pushing back strongly against the loosening in financial conditions we have seen in recent weeks.

"Stocks have had a good run higher this year so some profit-taking ahead of the uncertainty of the Fed makes sense too. The Fed is seen slowing the pace of hikes to 25bps tomorrow, with the two-day meeting kick off today. Markets currently price a 98.6% chance the FOMC votes to raise rates by 25bps, and a roughly 85% chance for one last hike in March - a setup that creates ample opportunity for a hawkish surprise from the Fed. The question is how high and for how long – the market is under and sees the Fed being more dovish than it will be."

On the macro front, fourth quarter employment cost data will be out at 1330 GMT, while November's house price index will follow at 1400 GMT, this month's Chicago PMI will be on deck at 1445 GMT, and the Conference Board's consumer confidence figures for January will be available at 1500 GMT.

In the corporate space, Caterpillar, McDonald's, Exxon Mobil, Spotify, Pfizer, and General Motors will report before the open, while Electronic Arts, AMD, Amgen, Chubb, Western Digital, and Snap will post their latest quarterly earnings after the close.

Reporting by Iain Gilbert at Sharecast.com