Fed Decision Approaches, Futures Decline, AMD Reports

Investing.com – Attention is focused on the Federal Reserve’s interest rate announcement expected Wednesday, as investors anticipate that the central bank will maintain current borrowing costs. Following the decision, comments from Fed Chair Jerome Powell will be closely monitored as markets seek to understand future policy directions. In other news, Advanced Micro Devices has revealed its forecasts for 2024 sales of its prominent AI-optimized chip.

1. Fed Decision Approaches

All eyes are on Washington, where the Federal Reserve will announce its latest interest rate decision later on Wednesday. The Federal Open Market Committee is widely expected to keep the Fed funds rate steady in a target range of 5.25% to 5.50% following its two-day meeting.

As a result, the markets will be particularly attentive to the Fed’s policy statement and Chair Powell’s press conference, eager for any insights on the future trajectory of interest rates. Powell has recently indicated the delicate balance the Fed must maintain between raising rates to curb inflation and avoiding broader economic repercussions. He may face questions about how long rates will remain high, especially after a surge in U.S. Treasury yields to nearly 16-year highs, which has placed significant pressure on stocks over recent months.

Analysts at ING noted, "The sharp move higher in longer-dated Treasury yields has created a meaningful tightening of financial conditions. This affords the Fed time to wait and assess whether its policy is restrictive enough to bring inflation back to target."

2. Futures Slip Ahead of Fed Meeting

U.S. stock futures indicated a lower trend ahead of the Fed’s policy announcement. At 06:19 ET, the Dow Jones futures had declined by 144 points or 0.4%, the S&P 500 futures lost 19 points or 0.4%, and the Nasdaq futures dropped 67 points or 0.5%.

Main indexes on Wall Street had closed higher in the previous session, as investors anticipated that the Fed would choose to keep interest rates steady. These gains contributed to a nascent relief rally to conclude a generally disappointing October, with the benchmark S&P and the Dow Jones seeing declines of 1.4% and 2.2%, respectively, while the Nasdaq was down 2.8%.

3. Advanced Micro Devices Projects AI Chip Sales

After-hours trading in Advanced Micro Devices shares experienced volatility following the chipmaker’s announcement of lower-than-expected fourth-quarter revenue estimates, coupled with its first forecast for 2024 sales of its AI-optimized chip.

AMD anticipates revenue for the current quarter to be around $6.1 billion, with a variance of plus or minus $300 million, falling short of expectations of $6.37 billion. The company also projected adjusted gross margins at 51.5%, below the anticipated 52.1%.

Despite this, the strength in AMD’s client business allowed it to report third-quarter adjusted revenue of $5.8 billion, slightly surpassing estimates. Executives shared that sales for the MI300 chip — a potential competitor to Nvidia in the lucrative AI sector — are expected to reach $2 billion next year.

Qualcomm is set to announce its latest earnings, alongside Mondelez, the parent company of Oreo.

4. Chinese Manufacturing Activity Contracts in October

Manufacturing activity in China unexpectedly shrank in October, according to a private survey released on Wednesday, signaling widespread declines in the sector, in line with earlier government survey results.

The Caixin manufacturing purchasing managers’ index (PMI) recorded a reading of 49.5 in October, falling short of expectations of 50.8 and decreasing from the previous month’s 50.6. A PMI reading below 50 indicates contraction, marking the first contraction in three months. The decline was primarily driven by decreasing domestic and international demand, alongside a slowdown in new orders for the second consecutive month. Export orders also continued to decrease amid deteriorating economic conditions in China’s key trading partners.

5. Oil Prices Rise Ahead of Fed Outcome

Oil prices edged upward on Wednesday in cautious trading ahead of the conclusion of the latest Fed meeting, while markets closely monitor developments in the ongoing Israel-Hamas conflict.

By 06:20 ET, crude oil futures were trading 1.3% higher at $82.10 a barrel, while Brent crude climbed 1.3% to $86.14. Both contracts saw more than a 1% decline the previous session and experienced a drop of over 10% for October, marking their worst performance since May.

On Tuesday, an industry report indicated that U.S. oil inventories increased by 1.3 million barrels last week, slightly less than expected. Official data from the Energy Information Administration is set to be released later in the session.