© Reuters
Investing.com — U.S. futures are pointing higher, with markets all but certain that Federal Reserve policymakers will keep interest rates on hold after a highly anticipated policy-setting meeting starting Tuesday. Elsewhere, Instacart shares will begin trading in New York after the online grocery delivery service priced its initial public offering at the upper end of its target range, while the United Auto Workers union warns of further U.S. plant closures if difficult negotiations with the three major automakers show no signs of progress.
1. Futures rise ahead of Fed meeting
U.S. stock futures held above the flat line as investors look ahead to the start of the Federal Reserve’s two-day meeting on Tuesday.
At 05:22 ET (09:22 GMT), the contract gained 20 points, or 0.1%, rose 3 points, or 0.1%, and was mostly unchanged.
The main indexes on Wall Street recorded a positive session on Monday, supported by a new jump in oil prices which supported the shares of energy companies such as ExxonMobil (NYSE:) and Chevron (NYSE:). The decision by Saudi Arabia and Russia to extend production cuts earlier this month recently pushed crude prices to multi-month highs.
Chipmakers, however, remained under pressure after Taiwan’s TSMC reportedly asked its major suppliers to delay deliveries of high-end manufacturing equipment. The British semiconductor designer Arm (NASDAQ:), which last week completed the largest initial public offering in nearly two years, saw its shares slide 4.5% in New York as traders fretted about broader economic uncertainty.
2. Fed meeting in focus
The Federal Reserve is widely expected to keep interest rates unchanged after Wednesday’s meeting, and Investing.com shows that markets are almost certain that borrowing costs will remain stuck somewhere between 5.25 % and 5.50%.
But the US central bank’s plans for the rest of 2023 are still a bit of a mystery. After this month, Fed officials will have two more closely watched meetings this year to decide whether another rate hike is warranted to prevent recently cooled inflation from accelerating.
Data last week showed that a surge in gasoline prices pushed consumer price growth in August to the fastest pace in 14 months, even as the annual “core” reading, adjusted for food and fuel, was was the slowest in the last two years. The numbers helped solidify expectations that the Fed will refrain from resuming its long tightening campaign in September.
Meanwhile, there is less than a 40% chance that interest rates will be raised again this year, according to the Fed Rate Monitor Tool. However, with signs pointing to rising auto and health insurance costs, as well as a potential increase in vehicle prices resulting from the ongoing auto workers strike, some economists see upside risks to inflation.
The reaction to this week’s meeting will likely be influenced by what the Fed has to say about the future path of price increases.
3. Instacart’s top-of-the-line IPO listing
Instacart priced its initial public offering at $30 a share, hitting the high end of an upwardly revised target, in the latest sign of a resurgence in the once-dormant new listing market.
The San Francisco company raised $660 million from the sale of 22 million shares. The shares will begin trading on Tuesday.
The sale of shares of the online grocery delivery service gives it a valuation of $9.9 billion on a fully diluted basis, though that’s a fraction of the $39 billion value placed on the company by bullish private investors in March 2021, during a pandemic-driven boom in grocery delivery orders.
Still, Instacart’s announcement was an indicator of a nascent recovery in an IPO market that had been slowed by economic tensions and rising interest rates. Also on Monday, marketing and data automation group Klaviyo improved its IPO price range ahead of the public debut of its shares this week.
Fueling the optimistic sentiment was strong demand for Arm’s launch, which saw shares of the SoftBank-backed company rise well above their peak price on the first day of trading last Thursday.
4. The UAW threatens more strikes across the United States
The United Auto Workers union warned that more U.S. plants will go on strike if no progress is made in negotiations with auto giants Ford (NYSE:), General Motors (NYSE:) and Jeep maker Stellantis (NYSE:).
In a video message on Monday, UAW President Shawn Fain noted that recent talks have proven fruitless, adding that the union does not intend to allow the three Detroit automakers to “draw it out.” The union and companies are at odds over wages and employee benefits.
More work stoppages could be announced Friday, Fain said. Strikes at plants in Michigan, Ohio and Missouri have already halted production of popular models such as the Ford Bronco, Jeep Wrangler and Chevrolet Colorado.
US Treasury Secretary Janet Yellen noted that it was still too early to say how the strikes might affect the broader economy, saying the impact could depend on how long the industrial action lasts.
5. Oil extends recent rally
Oil prices rose on Tuesday, for the fourth straight session, on recent supply concerns, exacerbated by the release of a weak forecast for U.S. shale production.
US oil production from major shale-producing regions is set to fall for a third straight month in October, reaching its lowest level since May 2023, the US Energy Information Administration said in its monthly drilling productivity report released on Monday. .
This has added to fears of a substantial supply shortfall this year, resulting from the extension of production cuts by Saudi Arabia and Russia.
At 5:23 a.m. ET, the futures were up 0.8% at $91.28 a barrel, while the contract rose 0.5% to $94.92. Prices have gained for three consecutive weeks and are now hovering around 10-month highs for both benchmarks.
