Here are the most important news, trends and analysis that investors need to start their trading day:
- Stocks set to bounce at the open ahead of the Fed's big rate decision
- Markets expect a 75 basis point Fed hike; EBC holds emergency meeting
- Mortgage demand is now less than half of what it was a year ago
- Bitcoin sinks again, now roughly 70% lower than November's record
- Biden blasts oil refiners' high profits at a time of soaring gas prices
1. Stocks set to bounce at the open ahead of the Fed's big rate decision
U.S. stock futures rose Wednesday as Wall Street prepares for what could be an even more aggressive Federal Reserve interest rate hike than the market was expecting just a few days ago. After last week's hotter-than-expected consumer inflation data, investors and the Fed will get a look at how those higher prices affected shoppers. May retail sales unexpectedly fell 0.3%, following a downwardly revised 0.7% increase in April. After the data, the 10-year Treasury yield fell from 2011 highs, trading around 3.38% on Wednesday.
The Dow Jones Industrial Average and the S&P 500 on Tuesday both dropped for five sessions in a row. The Nasdaq advanced modestly, breaking a losing streak of four straight trading days. Stocks hit session lows during the final hour of trading after seesawing between sharp gains and losses throughout the day. The Dow closed more than 17% lower than its January record highs, still in a steep correction. The S&P 500 and the Nasdaq both remained in bear markets, with the former down more than 22% from its January record and the latter off roughly 33% from November's all-time high.
2. Markets expect a 75 basis point Fed hike; EBC holds emergency meeting
Fed policymakers are considering a 75 basis point interest rate increase as they conclude their two-day June meeting on Wednesday. That's what the markets now expect after everyone until this week was pretty much counting on another 50 basis point hike. The rate decision is scheduled for 2 p.m. ET, with Fed Chairman Jerome Powell's usual post-meeting news conference 30 minutes later. Persistently high inflation has further raised the urgency of arresting spiraling prices. However, with more aggressive Fed tightening comes the risk of tipping the economy into a recession. That's the dilemma roiling markets.
The European Central Bank announced Wednesday plans to create a new tool to tackle the risk of fragmentation in the euro zone. The move comes after the EBC's emergency monetary policy meeting to address the surge in bond yields in recent days for many governments across the continent. The ECB's meeting Wednesday came just hours ahead of the Fed's rate decision.
3. Mortgage demand is now less than half of what it was a year ago
Total mortgage application volume has fallen to half of what it was last year, according to the latest Mortgage Bankers Association's seasonally adjusted index. Sharply rising interest rates are decimating refinance volume — and those rates, along with sky-high home prices and a shortage of houses for sale, are hitting demand from potential buyers. Last week, the average 30-year fixed-rate mortgage increased to 5.65%. And now this week, the 30-year mortgage hit 6.28% on Tuesday, according to a daily measure from Mortgage News Daily. After reaching record lows around 2.7% in late 2020, it started 2022 at 3.29%.
4. Bitcoin sinks again, now roughly 70% lower than November's record
Bitcoin tumbled Wednesday to a new 18-month low, spurring a sharp fall in crypto markets sparked by crypto lender Celsius freezing customer withdrawals. The world's largest cryptocurrency fell to under $21,000, its lowest since December 2020. Bitcoin has lost around 28% since Friday and more than half of its value this year. Since its all-time high above $68,000 in November, it's slumped about 70%. Expectations for sharper Fed rate hikes to fight inflation have also heaped pressure on risky assets from cryptocurrencies to stocks.
5. Biden blasts oil refiners' high profits at a time of soaring gas prices
President Joe Biden on Wednesday called on U.S. oil refining companies to produce more of their products, saying they need to help alleviate the burden of high prices on consumers. "At a time of war – historically high refinery profit margins being passed directly onto American families are not acceptable," the president said in a letter to oil companies including Exxon and Chevron. Biden is calling for "immediate actions to increase the supply of gasoline, diesel, and other refined product." The president's letter comes as sky-high energy costs add to inflationary concerns across the economy, with average gas prices nationally topping $5 per gallon.
— CNBC's Yun Li, Samantha Subin, Sarah Min, Silvia Amaro, Elliot Smith and Pippa Stevens as well as Reuters contributed to this report.
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