US equities opened higher on Wednesday, with the Nasdaq Composite leading gains, as investors positioned ahead of the Federal Reserve's interest-rate decision due at 2 p.m. ET. The market's focus is squarely on the central bank's policy statement and Fed Chair Kevin Warsh's press conference for signals on the future path of rates and inflation.
The Nasdaq Composite advanced 0.46% in early trading, while the S&P 500 gained 0.24%. The Dow Jones Industrial Average, however, slipped 34 points, reflecting a divergence in sector performance. This follows a two-day losing streak for major indexes, driven by elevated Treasury yields and persistent inflation concerns.
Fed rate hike odds remain high
According to the CME FedWatch tool, futures markets are pricing in a 92.7% probability of a quarter-point rate increase at this meeting, which would lift the target range to 3.75%–4.00%. Looking ahead, traders see a 41% chance of another hike in October and a 27% probability of a further increase in December.
The decision comes as inflation, while cooling from its peak, remains above the Fed's 2% target. August's consumer price index rose 3.4% year over year, down from May's 4.2% high. On a monthly basis, headline CPI increased 0.4% as expected, but core inflation rose 0.3%, slightly above forecasts. Energy prices have been a key driver, with oil and diesel costs climbing amid geopolitical tensions.
The White House has publicly urged the Fed to hold rates steady, but the central bank faces mounting pressure to act as price pressures persist. The possibility of a hike has grown in recent weeks as energy costs have surged and inflation expectations remain elevated.
Oil prices ease on Saudi supply reports
Oil prices retreated on Wednesday after reports that Saudi Arabia is offering additional crude cargoes through Oman, easing concerns about supply disruptions in the Middle East. Brent crude fell 1.7% to $106.88 per barrel, while West Texas Intermediate dropped 2.7% to $103. Despite the pullback, prices remain above $100, keeping upward pressure on inflation.
Diesel prices have also climbed, reaching $6 per gallon for the first time on Friday, a development that could feed into broader consumer costs. Treasury yields stayed elevated, with the 10-year yield hovering just below 5% and the 30-year yield at 5.346%, reflecting expectations of tighter monetary policy.
Tech stocks mixed ahead of decision
Technology shares were mixed in early trading. Nvidia and Meta each gained nearly 1%, while Apple rose 0.9%. Microsoft edged lower. Intel jumped 5.3% following reports of talks with SK Hynix about potential US memory-chip production, though SK Hynix said no plans have been confirmed.
The tech sector has been under pressure recently from concerns that major AI companies might slow their model development and product release pace. Semiconductors, cloud providers, and other tech names were mostly lower on Tuesday, contributing to the S&P 500's 0.45% decline and the Nasdaq's 0.78% drop. Investors are also weighing the impact of higher yields on growth stocks' valuations.
As the market awaits the Fed's decision, traders are also monitoring developments in gold prices, which have held above $4,300, and bitcoin's movement near $77.6K, as both assets react to the same macro forces. The outcome of the Fed meeting is likely to set the tone for risk assets in the near term.
This article is for informational purposes only and does not constitute financial advice.
