US futures swing amid caution over Federal Reserve response

Bloomberg

US equity-index futures fluctuated between gains and losses as investors debated whether inflation had eased enough to encourage the Federal Reserve to slow monetary tightening.
Contracts on the S&P 500 and Nasdaq 100 index rose about 0.1% each after the rally in US stocks on the back of a fifth month of decline in consumer-price growth. Treasuries rallied for a second day, while the dollar slipped. The Stoxx Europe 600 Index dropped for the second time in three days. Charter Communications Inc declined 5.8% in premarket New York trading amid concern its capital-spending plan may crimp cash flow.
While a softer-than-expected figure for US consumer price index stoked a rally across stocks and bonds, the gains were tempered by caution that the Fed may still remain resolute on continuing rate hikes. After a 50 basis-point increase in Fed’s policy rate was firmly priced in, traders remained on the edge over what signals policymakers may offer on when the hikes will stop and whether a rate cut is possible next year.
“The question is, with inflation still at generational highs, will the Fed walk through that door?” Stephen Innes, managing partner at SPI Asset Management, wrote in a note. “After an initially high-spirited response, the relatively muted reaction for stocks is likely attributable to pre-risk event positioning, prevailing bearish growth sentiment, technical factors and the devil in the details.”
Europe’s equity benchmark falls after posting the biggest single-day advance since November 10 as caution prevailed over Fed’s messaging as well as expectations for rate hikes by the European Central Bank and Bank of England on Thursday.
Treasuries with shorter-term maturities posted the biggest gains on Wednesday. The two-year and five-year rated shed 4 basis points each. Traders are betting that the Fed will opt for 50 basis points more of hikes, and then an equivalent-sized cut by the end of next year.
Charter Communications Inc., the second-largest US cable TV provider, fell in early trading after saying it will spend $5.5 billion to bring higher-speed broadband connections to customers. Higher capital expenditure and lower cash flow create near-term uncertainty, yet expanding the footprint could fuel subscriber growth, Bloomberg Intelligence analysts said.
In the UK, the pound traded near strongest level since June. Inflation in the country falls from a 41-year high in November, raising the possibility that worst of cost-of-living squeeze is over. A gauge of the dollar’s strength traded 0.3% lower.
Shares in Hong Kong, Japan and Australia held advances, nudging the MSCI Asia Pacific index towards a three-month high and a close of 19% above its October low.
Jitters over Fed policy echoed in the oil market, where West Texas Intermediate futures halted a two-day advance. Traders also weighed the demand outlook amid a rapid relaxation of Covid-19 restrictions in China against the effect of new cases on economic activity in the country.