Attention is fixed on the Federal Reserve's interest rate announcement on Wednesday, with investors expecting the central bank to keep borrowing costs steady. Comments from Fed Chair Jerome Powell will be in the spotlight following the decision as markets attempt to gauge where officials see policy heading in the future. Elsewhere, Advanced Micro Devices (NASDAQ:AMD) unveils its projection for 2024 sales of its key AI-optimized chip.

1. Fed decision looms

All eyes are set to turn to Washington, where the Federal Reserve is due to deliver its latest interest rate decision later on Wednesday.

The U.S. central bank's Federal Open Market Committee is widely tipped to leave the all-important Fed funds rate unchanged at a target range of 5.25% to 5.50% after its two-day meeting, according to Investing.com's Fed Rate Monitor Tool.

As a result, markets will likely be paying particularly close attention to the Fed's accompanying policy statement and Chair Jerome Powell's post-meeting news conference, with traders hungry for any insight into how officials see rates evolving.

Powell has recently hinted at the tightrope the Fed must walk as it attempts to hike policy to a level that will cool inflation but not cause broader malaise in the U.S. economy. Powell may be pressed to comment on how long the Fed will keep rates elevated, particularly in the wake of a spike in U.S. Treasury yields to near 16-year highs that has weighed heavily on stocks over the past two months.

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

2. Futures lower ahead of Fed meeting

U.S. stock futures were pointing lower ahead of the Fed's policy announcement.

At 06:19 ET (10:19 GMT), the Dow futures contract had shed 144 points or 0.4%, S&P 500 futures lost 19 points or 0.4%, and Nasdaq 100 futures dropped by 67 points or 0.5%.

The main indices on Wall Street closed higher in the prior session, as investors predicted that the Fed would keep interest rates steady on Wednesday.

The gains added to a nascent relief rally to close out a mostly downbeat October. For the month, the benchmark S&P 500 and 30-stock Dow Jones Industrial Average fell by 1.4% and 2.2%, respectively, while the tech-heavy Nasdaq Composite dipped by 2.8%.

3. Advanced Micro Devices unveils AI chip sales forecast

Extended-hours trading in Advanced Micro Devices shares was volatile after the chip designer announced smaller-than-anticipated fourth-quarter revenue estimates but projected 2024 sales of its AI-optimized chip for the first time.

AMD said it expects revenue in the current quarter of around $6.1B, plus or minus $300 million, disappointing expectations cited by Reuters of $6.37B. Adjusted gross margins were seen at 51.5%, below forecasts of 52.1%.

But strength at the California-based chip designer's client business helped the company post third-quarter adjusted revenue of $5.8B, just topping estimates. AMD executives also told investors that sales of the firm's MI300 chip -- a possible rival to Nvidia (NASDAQ:NVDA) in the lucrative artificial intelligence market -- will come in at $2B next year.

Semiconductor manufacturer Qualcomm (NASDAQ:QCOM) is scheduled to release its latest earnings on Wednesday, along with Oreo-owner Mondelez (NASDAQ:MDLZ).

4. Chinese manufacturing activity shrinks in October - Caixin data

Chinese factory activity unexpectedly contracted in October, a private survey showed on Wednesday, pointing to broad declines in the sector after a government survey also showed a similar reading earlier this week.

The Caixin manufacturing purchasing managers' index (PMI) read 49.5 in October, missing expectations of 50.8 and falling from the 50.6 seen in the prior month. A mark below 50 indicates contraction, with the Caixin PMI contracting for the first time in three months.

The weak figure was driven chiefly by softening domestic and overseas demand, while growth in new orders slowed for a second straight month. Export orders continued to decline amid worsening economic conditions in China’s biggest trading partners.

5. Oil moves higher as markets await Fed verdict

Oil prices crept up on Wednesday in cautious trading ahead of the conclusion of the latest Fed meeting, with markets also closely watching developments in the Israel-Hamas conflict.

By 06:20 ET, the U.S. crude futures traded 1.3% higher at $82.10 a barrel, while the Brent contract climbed 1.3% to $86.14. Both contracts fell more than 1% the previous session, and also tumbled more than 10% in October, their worst month since May.

On Tuesday, data from the American Petroleum Institute industry body indicated that U.S. oil inventories rose 1.3 million barrels last week, slightly less than expected. Official numbers from the Energy Information Administration are due later in the session.

Source : Economy News by Investing.com / November 01, 2023