US pre-open: Stocks set for weaker start as focus shifts to Fed meeting

US futures pointed to a weaker open on Wall Street on Tuesday as caution crept in ahead of the Federal Reserve’s two-day policy meeting and some key data releases.

“US stocks look set for a weaker start after the lack of stimulus action from the Bank of Japan as the Federal Reserve begins its two-day policy meeting ahead of retail sales data,” said CMC Markets’ Jasper Lawler.

At 1130 GMT, Dow Jones Industrial Average and Nasdaq futures were both down 0.4% while S&P 500 futures were 0.6% lower.

At the same time, oil prices were weaker, with West Texas Intermediate down 2.6% to $36.22 a barrel and Brent crude off 2.7% at $38.45 after the Organization of the Petroleum Exporting Countries warned on Monday that supply would likely be higher than expected this year.

Investors were in wait-and-see mode ahead of the Fed’s rate announcement on Wednesday. Although the central bank is widely expected to leave interest rates unchanged, market participants are expected to pay close attention to the Fed’s economic projections and language for hints over any future moves.

On the macroeconomic calendar, the focus will be US retail sales and Empire manufacturing at 1230 GMT.

“The US economy is not suffering to the degree that early-2016 stock market weakness would have you believe. If that is reflected by the FOMC, we could see significant volatility,” said Joshua Mahony, market analyst at IG.

“Today’s US retail sales data from the US is a great indicator of whether economic activity is sufficiently stable for the Fed to once more consider sending out a more hawkish tone.”

On the corporate front, Valeant Pharmaceuticals shares tumbled in pre-market trade after its fourth quarter results missed analysts’ expectations and the company downgraded its revenue forecast for 2016.

Avon Products was likely to be in the spotlight after it announced on Monday that it would cut around 2,500 jobs and move its corporate headquarters to the UK.

In currencies, the dollar was 1% firmer versus the pound, 0.1% higher against the euro and 0.6% weaker versus the yen.