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Saturday December 3rd, 2022 6:41PM

Wall Street futures modestly higher ahead of Fed rate call

By The Associated Press
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U.S. stock futures are modestly higher Wednesday ahead of a widely expected interest rate hike by the Federal Reserve as it continues to cool the worst inflation in 40 years.

Futures for the Dow Jones industrials and S&P 500 each rose 0.4%.

It is no longer a question of if the Fed will raise rates Wednesday, but how high at the conclusion of the central bank's two-day meeting.

Bond yields mostly edged higher. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.56% from 3.52% from late Monday and is trading at its highest levels since 2011.

The yield on the 2-year Treasury, which tends to follow expectations for Fed action, held steady at 3.96%, hovering around its highest levels since 2007.

Stocks have slumped and Treasury yields have taken off as the Fed raises the cost of borrowing money to cool the economy.

Fed Chair Jerome Powell bluntly warned in a speech last month that the rate hikes would “bring some pain.”

In Europe, markets mostly rebounded at midday from earlier losses, with France's CAC 40 up 0.2%, Germany's DAX inching into positive territory and Britain's FTSE 100 up 0.9%.

Japan's benchmark Nikkei 225 dipped 1.4% to finish at 27,313.13. Australia's S&P/ASX 200 dropped 1.6% to 6,700.20. South Korea's Kospi lost 0.9% to 2,347.21. Hong Kong's Hang Seng shed 1.8% to 18,444.62, while the Shanghai Composite slipped 0.2% to 3,117.18.

Global tensions are adding to uncertainties. Russian-controlled regions of eastern and southern Ukraine have announced plans to start voting this week to become integral parts of Russia.

The Kremlin-backed efforts to swallow up four regions could set the stage for Moscow to escalate the war against Ukraine. Russian President Vladimir Putin recently blasted what he described as U.S. efforts to preserve its global domination and ordered officials to boost weapons production.

The war has killed thousands of people, driven up food prices worldwide and caused energy costs to soar. Natural gas futures are up 5% Wednesday after Putin's televised speech and stock in natural gas producers are among the biggest gainers on the S&P.

Later Wednesday, the Fed is expected to raise its key short-term rate by three-quarters of a point for the third time. That would lift its benchmark rate, which affects many consumer and business loans, to a range of 3% to 3.25%, the highest level in 14 years, and up from zero at the start of the year.

The language used by Powell is read as closely as the decision on rate hikes, with markets seeking any clue as to how the Fed views the health of the U.S. economy.

Central banks worldwide are in the same dilemma, attempting to cool red-hot economies without tipping them into recession.

The Bank of Japan began a two-day monetary policy meeting Wednesday, although analysts expect the central bank to stick to its easy monetary policy. Rate decisions from Norway, Switzerland and the Bank of England are next. Sweden surprised economists this week with a full point hike.

In energy trading, benchmark U.S. crude rose $1.57 to $86.02 a barrel in electronic trading on the New York Mercantile Exchange. It fell 1.5% Tuesday, weighing down energy stocks. Brent crude, the international standard, added $2.11 to $92.73 a barrel.

The average price for a gallon of gas went up for the first time in more than three months, rising to to $3.681 from $3.674, according to motor club AAA.

In currency trading, the U.S. dollar inched up to 144.04 Japanese yen from 143.74 yen. The euro fell to 99.09 cents from 99.73 cents.

___

Kageyama reported from Tokyo; Ott reported from Washington.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services, AP Business - Utilities
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