US pre-open: Stocks to nudge up ahead of Fed announcement

US futures pointed to a slightly firmer open on Wall Street on Wednesday, with all eyes on the latest policy announcement from the Federal Reserve.

At 1230 BST, Dow Jones Industrial Average futures were up 0.1%, while S&P 500 and Nasdaq futures were 0.2% higher.

Oanda market analyst Craig Erlam said investors will be hanging on the Fed’s every word in light of recent banking sector instability.

"Today was always likely to mark the end of the US central bank's tightening cycle - not that it has explicitly signaled this - but we've now reached a stage in which every rate hike could have unwanted and unintended consequences," he said.

"Turbulence in the banking system in March is evidence of that and the rescue of First Republic Bank by JP Morgan in recent days, and the sell-off that followed in other regional banks, suggests significant stress remains.

"Which begs the question, why would the Fed opt to tighten at all today when it can see that the financial system is under strain, credit conditions have tightened as a result and the lag with which monetary policy operates means they don't yet fully understand what the full impact of their recent rate hikes has been.

"With that in mind, it would be perfectly reasonable to pause today especially when we're already starting to see signs of the labour market softening and inflation easing. And you can see that investors are of the view that a rate hike today is a mistake as they see a high likelihood of it being reversed over the next couple of meetings. Hardly a vote of confidence.

"And yet, it still looks extremely likely which makes the Fed's communication alongside it all the more important. It must now pivot away from promising further rate hikes towards a more neutral stance or we could see further turbulence in financial markets, particularly in those regional banks that still look vulnerable."

The announcement from the Fed is due at 1900 BST. Before that, market participants will be watching out for the ADP employment report at 1315 BST.

On the corporate front, Eli Lilly surged in pre-market trade after saying that one of its experimental Alzheimer's drugs slowed cognitive decline by 35% in a late-stage trial.

CVS Health was likely to fall at the open after cutting its annual profit forecast, while Yum Brands and Estee Lauder were also likely to be in focus after results.