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Stock futures rise ahead of expected Federal Reserve rate hike

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I wish the Fed would just raise more and get it over with, says Ed Yardeni

Stock futures were slightly higher on Wednesday morning as traders look ahead to the impending announcement of a Federal Reserve rate hike.

The Dow Jones Industrial Average futures were up 42 points, or 0.14%. S&P 500 and Nasdaq 100 futures were up 0.15% and 0.13%, respectively.

Shares fell Tuesday on the first day of the Federal Open Market Committee meeting. The Dow Jones Industrial Average lost 313.45 points, or 1.01%. The S&P 500 and Nasdaq Composite fell 1.13% and 0.95% respectively.

Revenues also skyrocketed on Tuesday. The yield on 2-year US Treasuries rose to 3.99%, the highest level since 2007. The yield on 10-year Treasuries briefly reached 3.6%, the highest level since 2011.

Investors expect the central bank to release its third consecutive 0.75 percentage point rate hike to tame high inflation. A higher-than-expected reading of the consumer price index in August and aggressive comments about rate hikes from Fed leaders weighed on equities, with more pressure likely ahead as the central bank continues to fight inflation.

“We’ll never really know if the stock market’s lows are for the year without successfully testing the June lows,” John Lynch, chief investment officer at Comerica Wealth Management, said in a note dated Tuesday. “To be sure, the recent technical weakness in stock prices must now be confronted with the determination of monetary policymakers in their fight against inflation.”

He added that the third quarter earnings season could also create headwinds for stock prices as they show further margin erosion for US companies.

Investors will also be looking at the earnings of Lennar, KB Homes, General Mills and Steelcase Wednesday. Existing home sales will also be released on Wednesday morning.

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