Fed benchmark decision in focus, futures higher

Investing.com — U.S. stock futures rose on Wednesday ahead of a key Federal Reserve interest rate decision, with debate surrounding whether the central bank will choose to cut borrowing costs by 25 basis points or 50 basis points more aggressive. . Independent directors on the board of genetic testing group 23andMe have quit following failed negotiations with chief executive Anne Wojcicki over her proposal to take the group private, sending shares plummeting in after-hours trading.

1. Focus on the Fed

The Federal Reserve is tipped to cut interest rates for the first time since March 2020 after the conclusion of its latest two-day meeting on Wednesday, but the extent of the cut remains a source of considerable uncertainty for investors.

According to CME Group’s closely monitored FedWatch tool, the odds of a jumbo cut of 50 basis points — rather than a more traditional 25 basis point cut — are 61 percent.

Bets that the Fed will release a very large rate cut have risen in recent days, fueled by reports in the Financial Times and the Wall Street Journal that the move remains a possibility. Meanwhile, former New York Fed President Bill Dudley said there was a “serious case” for a half-point cut, arguing that borrowing costs are currently well above the so-called neutral rate, which doesn’t even neither restricts nor accepts economic activity.

However, according to analysts at ING, the decision is still “a close call”. In the final point of data before the announcement, US retail sales unexpectedly rose in August, pointing to consumer resilience and broader economic strength. Such trends, along with recent mixed inflation numbers and falling job demand, could further complicate matters for Fed officials.

Traders will also be looking for any insight into how the Fed plans to approach a possible easing cycle, with markets currently betting on cuts of at least 100 basis points by the end of 2024.
“We strongly suspect the Fed will emphasize uncertainty about the macro outlook and a willingness to be flexible,” ING analysts said in a note to clients.

2. Futures are bigger

US stock futures rose on Wednesday ahead of the Fed’s crucial interest rate decision.

By 03:30 ET (0730 GMT), the contract had gained 45 points, or 0.1 percent, was up 7 points, or 0.1 percent, and added 39 points, or 0.2 percent.

The benchmark index and 30 stocks were largely unchanged following a choppy trading session on Tuesday. The averages, buoyed by surprising retail sales figures, had hit record highs earlier in the session.

Meanwhile, the technology industry ended the trading day up 36 points or 0.2%.

“(S)heels sprinted out of the gate before fading sharply in the afternoon on Fed questions/concerns,” analysts at Vital Knowledge said in a note to clients.

3. 23andMe independent directors resign from the board

All seven independent directors on the board of genetic testing company 23andMe resigned on Tuesday, saying they did not receive a satisfactory private offer from the company’s chief executive, Anne Wojcicki.

In a letter to Wojcicki, the executives said she had not sent them a “fully funded, fully due diligence, actionable proposal that is in the best interests of unaffiliated shareholders.” They added that they disagreed with Wojcicki’s vision for the business’s strategy.

The group’s shares tumbled during extended trading hours.

The resignations leave Wojcicki, who controls 49 percent of 23andMe, as the sole board member. She previously notified the board of her intention to take the firm private and proposed to buy all the shares she does not own for $0.40 per share, although a special committee formed to review the offer rejected it.

In a memo to employees, cited by the Wall Street Journal, Wojcicki said she was “surprised and disappointed” by the decision, adding that she still believed it would take the group private — and relieve it of the “short-term pressures of public markets”. — is the best plan.

4. Nippon Steel wins US Steel deal review extension – Bloomberg

Nippon Steel Corp ( TYO: ) won an extension in a security review of its $14.1 billion pursuit of United States Steel Corporation ( NYSE:NYSE: ), likely pushing a decision on the deal after U.S. elections in November, Bloomberg reported Tuesday.

Nippon Steel will be allowed to rescind and resubmit to a U.S. securities watchdog overseeing the deal, potentially keeping the deal alive even though President Joe Biden has vowed to pull out of the deal, Bloomberg reported, citing people who they are aware of this problem.

Shares of US Steel (BVMF: ) rose more than 3% in aftermarket trade following the Bloomberg report.

The takeover has become a key point of contention in the 2024 presidential election, particularly in the battleground state of Pennsylvania, home to US Steel and the United Steelworkers union. The labor group opposed the agreement.

5. Oil prices inches lower

Oil prices fell in European trade on Wednesday, paring a recent rally as industry data showed an unexpected rise in US inventories.

But prices have enjoyed strong gains over the past week as persistent supply disruptions from Hurricane Francine and the prospect of lower rates sent traders hitting crude at sharply reduced levels.

An escalation in Middle East tensions also helped boost crude demand as Hezbollah vowed retaliation against Israel after it accused it of setting off pagers in Lebanon this week.

It was down 0.5 percent at $73.33 a barrel, while it was down 0.5 percent at $69.63 a barrel by 03:30 ET (0730 GMT). Both contracts rose sharply from near three-year lows last week.