Stock Market Today: Stocks drift lower ahead of Fed rate decision

Markets are adopting a cautious stance as the Federal Reserve begins its two-day policy meeting later this morning in Washington.

Jun 11, 2024 - 18:30

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Stock Market Today: Stocks drift lower ahead of Fed rate decision

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U.S. equity futures moved lower Tuesday, while Treasury yields and the dollar held steady, as investors adopted a defensive tone across global markets heading into the start of the Federal Reserve's two-day policy meeting in Washington.

Stocks ended higher on Monday, with the S&P 500 notching its 26th record close, powered in part by megacap tech gains, following an uneven session that suggested a fair amount of investor caution heading into tomorrow's Fed rate decision.

The central bank is also set to publish fresh growth and inflation forecasts alongside its policy statement. Investors expect a sharp reduction in the number of rate cuts from Fed officials between now and year's end.

"The Fed will likely hold its forward guidance largely unchanged," said Bill Adams, chief economist for Comerica Bank in Dallas.

"On the one hand, the Fed would not hesitate to raise rates further if they assess that interest rates need to be higher to control inflation," he said. "On the other hand, most Fed policymakers think rates are already high enough to keep inflation headed lower, and expect it to cool later this year and open the door to interest rate cuts."

The looming Fed decision is likely to keep a cap on sentiment throughout today's session, especially with a key May inflation report expected prior to the start of trading tomorrow.

Benchmark 10-year Treasury note yields were little changed at 4.454% heading into the start of the New York trading session, with 2-year notes pegged at 4.847%.

The U.S. dollar index, which tracks the greenback against a basket of global currency peers, was marked 0.04% higher at 105.191.

Markets are focused on tomorrow's Fed rate decision, as well as a key reading of May Consumer Price Index inflation.
Bloomberg/Getty Images

On Wall Street, stocks are set for a muted open, but recent trading patterns suggest the likelihood of larger upside moves during the trading day, with the VIX index of market volatility marked 6.9% higher at $13.06.

Futures contracts tied to the S&P 500 suggest a 10-point opening-bell gain while those linked to the Dow Jones Industrial Average suggest a 130-point pullback. The Nasdaq is called 45 points lower.

Stocks on the move include Apple (AAPL) , which was marked 0.42% lower following yesterday's AI launch event. The tech giant unveiled a series of new tools and a tieup with Microsoft-backed (MSFT) ChatGPT.

Eli Lily (LLY) shares, meanwhile, jumped 2.9% after an independent panel of advisers to the U.S. Food and Drug Administration recommended approval of its Alzheimer's treatment known as donanemab.

Oracle (ORCL) shares slipped 0.16% ahead of the cloud-computing group's fiscal-fourth-quarter earnings, slated for after the closing bell. Investors are looking for a bottom line of $1.65 per share on revenue of $14.59 billion.

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In Europe, the regionwide Stoxx 600 traded firmly in the red for a second consecutive session and was last marked 0.51% lower in Frankfurt. The move came amid the fallout from weekend parliamentary elections and French President Emmanuel Macron's decision to call a snap vote slated for June 30.

Overnight in Asia, a weaker yen and stronger tech stocks helped lift the Nikkei 225 0.25% higher in Tokyo, while the regional MSCI ex-Japan benchmark fell 0.63% into the close of trading.