US Stocks Search For Direction As Inflation-Induced Momentum Falters Ahead Of Fed Decision: Tesla, Moderna, Plug Power In Focus

The U.S. index futures flitted around on Wednesday morning, reflecting the indecision among traders ahead of the Federal Open Market Committee’s interest rate decision.

Tuesday, stocks rallied out of the gate, encouraged by November’s slower-than-expected inflation reading. The euphoria did not last through the session and the major averages gave back much of their early gains by the mid-session and moved sideways in a consolidation move.

Technology, material, real estate and energy stocks led the market rally even as consumer staple stocks lost ground in the session.

U.S. Indices' Performance On Tuesday

Index	Performance (+/-)		Value
Nasdaq Composite	+1.01%		11,256.81
S&P 500 Index	+0.73%		4,019.65
Dow Industrials	+0.30%		34,108.64

The Santa is coming after all, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

“Given the better-than-expected inflation data this morning, with the year-over-year number coming in lower than expected and the month-over-month number slowing considerably, markets have a green light to rally into year-end,” the analyst said.

Here’s a peek into index futures trading:

U.S. Futures' Performance On Wednesday During Premarket Session

Index	Performance (+/-)
Nasdaq 100 Futures	-0.09%
S&P 500 Futures	-0.02%
Dow Futures	+0.01%
R2K Futures	+0.32%

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY edged down 0.06% to $401.71and the Invesco QQQ Trust QQQ fell 0.09% to $288.40, according to Benzinga Pro data.

On the economic front, the spotlight is on the FOMC’s rate decision due at 2 p.m. EST. The consensus view is that the central bank will slow down the pace of its rate increase to 50 basis points as it takes stock of the recent inflation data.

Chair Jerome Powell will host a post-meeting press briefing at 2:30 a.m. EST.

Easing inflation would mean the Fed is on track to downshift the pace of rate increases, said Jeffrey Roach, chief economist at LPL Financial. The analyst expects the central bank’s updated projections to include upward revisions to the 2023 inflation rate as well as the peak fed funds rate.

Comerica Bank chief economist Bill Adams is of the view that the Fed might start to ease by the fall of 2023 if inflation continues to fall.

“But that process is expected to be very gradual since the Fed doesn't want to be caught offsides by a too rapid reacceleration of the economy fueling a rebound of inflation,” he added.

The Mortgage Bankers’ Association will release its weekly mortgage application volume data at 7 p.m. EST.

The Labor Department is scheduled to release the export and import prices report for November at 8:30 a.m. EST. On a month-over-month, export prices are estimated to have dipped 0.4%, while import prices may have fallen 0.5%.

The Energy Information Administration is due to release its weekly oil inventory report for the week ended Dec. 9 at 10:30 a.m. EST.

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Stocks In Focus:

• Tesla, Inc. TSLA slid over 1% in premarket trading, extending its losses for a third straight session.
• Moderna, Inc. MRNA carried forward the momentum from Tuesday and traded up 2%.
• Plug Power, Inc. PLUG advanced over 2.8% after UBS initiated the stock with a Buy rating, according to the Fly.

Charter Communications, Inc. CHTR fell over 5% after it communicated an increase in 2023 capital expenditures at its analyst day held on Tuesday.

• Homebuilder Lennar, Inc. LEN, Nordson Corp. NDSN and Trip.com Group Limited TCOM are among the notable companies reporting earnings after the market close.

Commodities, Other Global Equity Markets:

Crude oil futures advanced for a third straight day on Wednesday, with a barrel of WTI-grade crude oil rising over 1% to $76.17. International Energy Agency said in its December oil market report released Wednesday that crude prices will likely rally in 2023, prodded by sanctions on Russian oil and higher-than-anticipated demand.

Most Asia-Pacific markets rose on Wednesday, reacting to tamer-than-expected U.S. inflation data. The Indonesian and New Zealand markets, however, bucked the downtrend.

European stocks opened lower and have pulled back further by late morning trading. Rate fears are likely to weigh down on sentiment, as the Fed, the European Central Bank and the Bank of England are all due to announce interest rate decisions, the former on Wednesday and the latter two on Thursday.

Read next: Inflation May Soften In November But This Analyst Thinks It Might Take Months For It To Get Back Closer To Fed's Target