Stocks fall as Wall Street prepares for Fed rate decision

Stocks opened lower as Wall Street awaited the Fed’s lastest policy decision.

The Dow Jones Industrial Average fell 95 points, or roughly 0.3%. The S&P 500 futures and Nasdaq Composite edged down 0.3% and 0.2%, respectively.

— Samantha Subin

Investors in the fed fund futures market are betting the Federal Reserve will take its fed funds rate just above 5% before stopping rate hikes next year.

The Federal Reserve was meeting Wednesday and is expected to raise its fed funds rate by 75 basis points when it releases a policy statement at 2 p.m. ET.

The May contract was priced for 5.02% Wednesday morning. The Fed is currently targeting fed funds in a range of 3% to 3.25%.

“Over the last two weeks, it’s been bouncing around 5%,” said Ben Jeffery, BMO rate strategist. He said the futures market is also pricing for a 75 basis point rate hike for Wednesday afternoon and is giving more than 50/50 odds to a 50 basis point hike in December. A basis point equals 0.01 of a percentage point.

“The base case is 75 today, 50 in December and 25 in February,” said Jeffery.

Market pros expect the Fed will also signal Wednesday that it could begin raising rates at a slower pace, starting in December.

That signal could come from Fed Chairman Jerome Powell when he speaks to the media at 2:30 p.m. ET.

“Until we hear from Powell at 2:30, I think this is just noise,” said Michael Schumacher of Wells Fargo.

— Patti Domm

Shares of Chinese companies listed in the U.S. rose again during Wednesday’s premarket trading amid rumors that China may pivot from its strict zero-Covid policy.

The KraneShares CSI China Internet ETF gained more than 2%, building on Tuesday’s 5.5% advance. The iShares China Large-Cap ETF added roughly 1%.

Individual stocks including Alibaba and Pinduoduo added 1% each.

— Samantha Subin

This holiday season, the toy industry won’t see the double-digit growth it enjoyed for the past two years, according to KeyBanc Capital Markets.

Toy sales in 2020 and 2021 were fueled by stimulus, increased savings and stay-at-home activity.

“We believe current macroeconomic uncertainty, inflationary pressures, and restrictive financial conditions create a more difficult environment,” analyst Bradley Thomas wrote in a note Tuesday.

Consumers have already been pulling back from discretionary purchases at Target and Walmart this year, he noted. Mattel and Hasbro have also recently said they are preparing for more promotions compared to last year.

Thomas believes Ollie’s Bargain Outlet Holdings is best positioned this season thanks to its high-quality and robust inventory and closeout deals.

— Michelle Fox

Companies reporting…