Wall Street Futures Slightly Higher Ahead of Fed Rate Call

By YURI KAGEYAMA and MATT OTT
AP Business Writers

U.S. stock futures are slightly higher on 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 on industrial stocks for the Dow Jones and the S&P 500 each rose 0.4%.

It’s no longer a question of whether the Fed will raise rates on Wednesday, but how much after the central bank’s two-day meeting.

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

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

Stocks tumbled and Treasury yields soared as the Fed raises borrowing costs to cool the economy.

Fed Chairman Jerome Powell bluntly warned in a speech last month that rate hikes “would cause pain.”

In Europe, markets mostly rebounded midday after earlier losses, with France’s CAC 40 up 0.2%, Germany’s DAX in positive territory and Britain’s FTSE 100 up 0.9%.

Japan’s benchmark Nikkei 225 fell 1.4% to end at 27,313.13. Australia’s S&P/ASX 200 fell 1.6% to 6,700.20. The South Korean Kospi fell 0.9% to 2,347.21. Hong Kong’s Hang Seng fell 1.8% to 18,444.62, while the Shanghai Composite fell 0.2% to 3,117.18.

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

Kremlin-backed efforts to gobble up four regions could pave the way for Moscow to escalate the war against Ukraine. Russian President Vladimir Putin recently lambasted what he described as US efforts to preserve global dominance and ordered officials to increase arms production.

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

Later Wednesday, the Fed is expected to raise its short-term policy rate by three-quarters of a point for the third time. That would take 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 Powell used is read as narrowly as the rate hike decision, with markets looking to see how the Fed views the health of the U.S. economy.

Central banks around the world face the same dilemma, trying to cool hot economies without tipping them into recession.

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

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% on Tuesday, weighing on energy stocks. Brent crude, the international standard, added $2.11 to $92.73 a barrel.

The average price of a gallon of gasoline rose for the first time in more than three months, from $3,674 to $3,681, according to the AAA motor club.

In currency trading, the US dollar fell from 143.74 yen to 144.04 Japanese yen. The euro fell to 99.09 cents from 99.73 cents.

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Kageyama reported from Tokyo; Ott reported from Washington.