US pre-open: Stocks seen touch weaker as investors eye Fed meeting

US stock futures were pointing to a marginally weaker open on Wall Street on Tuesday as investors eyed the latest policy announcement from the US Federal Reserve this week, while concerns about the debt ceiling continued to play on investors’ minds.

At 1220 BST, Dow Jones Industrial Average futures were down 0.2%, while S&P 500 futures were 0.1% lower and Nasdaq futures were flat.

Investors were eyeing the start of the Fed’s two-day policy meeting later, amid expectations that it will deliver a 25 basis points rate hike on Wednesday.

Neil Wilson, chief market analyst at Markets.com, said: "Such a move would bring the Fed funds rate to a range of 5%-5.25%, in line with its current central forecast for the peak in interest rates. The recent banking crisis may see the Fed look to be more cautious, whilst there has been evidence of disinflation, albeit core readings for price growth remain stubbornly high.

"Final hike? Markets price a one-in-four likelihood of a further hike in June, with cuts coming by the end of the year, though this is not what Fed policymakers believe will happen. And what about the debt ceiling? Hard to see the Fed be too hawkish until that is resolved."

Earlier on Tuesday, Australia's central bank surprised markets by lifting its key interest rate again and warned of more hikes to come as it battled to combat persistent inflation.

The Reserve Bank of Australia raised its cash rate 25 basis points to 3.85% at its monthly meeting, against expectations of a second consecutive pause.

RAB governor Philip Lowe said inflation in Australia had "passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range".

On home shores, the US debt ceiling was also in focus amid political gridlock in Washington.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "Nerves are rising about the debt ceiling standoff in the US, with the prospect that a default could shake the global economy, just as worries about further banking repercussions have been calmed for now.

"With congressional leaders summoned by President Biden, the focus is now switching to how the US government will be able to pay its bills amid gridlock in Washington."

In corporate news, shares in Chegg - which provides online guidance for students preparing tests - tumbled in pre-market trade after it warned over the impact of AI chatbots on its homework-help services. In its first-quarter earnings on Monday, the company said that since March, it had seen "a significant spike" in student interest in ChatGPT.

"We now believe it’s having an impact on our new customer growth rate," it said.

Shares in Pfizer, Uber and DuPont were also likely to be active following results.