Fed decision ahead, Instacart's IPO - what's moving markets

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Fed decision ahead, Instacart's IPO - what's moving markets
Credit: © Reuters.

Investing.com -- The U.S. Federal Reserve is tipped to keep interest rates steady on Wednesday, placing added emphasis on new economic projections from the central bank's officials that could hint at the path ahead for monetary policy this year. Elsewhere, Instacart (NASDAQ: CART ) shares dip in U.S. premarket trading, paring back some gains made in their debut on Tuesday, as hopes grow for a revival in initial public offerings.

1. Fed set to leave rates unchanged

The Federal Reserve is widely expected to leave interest rates steady later today, as investors attempt to gauge how the U.S. central bank will approach monetary policy throughout the rest of the year.

According to Investing.com's Fed Rate Monitor Tool , there is a 98% chance that the rate-setting Federal Open Market Committee will keep borrowing costs unchanged at a range of 5.25% to 5.50%.

With markets mostly pricing in a rate hold, one of the major questions will center around whether the Fed feels it may need to resume a long-standing policy tightening campaign later on in 2023 to help tamp down persistent inflation.

Data last week presented a somewhat mixed picture for price gains in the world's largest economy. Annual headline inflation climbed by more than anticipated in August because of a surge in fuel costs, although the underlying reading slowed to its lowest level in almost two years.

Attention will likely focus in on a fresh batch of officials' individual economic and policy projections, also known as the "dot plot," which could point to broad support for one additional quarter-point rate increase this year. However, this hike remains far from a certainty: while the Fed may be willing to maintain rates at a higher level for longer, it does not want to place too much downward pressure on the wider economy.

2. Futures edge higher with Fed decision looming

U.S. stock futures moved up slightly on Wednesday morning, but remained close to the flatline, with all eyes on the Fed's crucial rate decision.

At 05:27 ET (09:27 GMT), the Dow futures contract added 39 points or 0.1%, S&P 500 futures climbed by 6 points or 0.1%, and Nasdaq 100 futures inched up by 22 points or 0.1%.

The main indices on Wall Street fell in the prior session. U.S. Treasury yields also touched a 16-year high, in a sign that traders are betting that Fed Chair Jerome Powell will suggest the central bank will press on with the higher-for-longer strategy.

There is currently a little more than one-in-four chance that the Fed will raise rates at its November meeting and just over a one-in-three possibility at its December gathering, the Fed Rate Monitor Tool showed.

3. Instacart shares point lower premarket after debut jump

Shares in online grocery delivery service Instacart were indicated to open lower on Wednesday, retreating from a 12% gain in their first day of trading in New York in the previous session that reflected a nascent enthusiasm for new listings.

The stock ended the session at $33.70 per share on the Nasdaq, giving San Francisco-based Instacart a fully-diluted value of $11.2 billion. It had earlier surged by as much as 40%, or $42 a share, shortly after trading began.

Despite the stellar initial public offering, Instacart shares still have some way to climb to reach the lofty $39B valuation assigned to the company by private investors during the pandemic, when demand was boosted by a boom in at-home food orders.

But Instacart's well-received debut still points to an emerging optimism for the IPO market, which had recently gone dormant due to economic uncertainty, heightened interest rates, and slipping tech valuations. SoftBank-backed chip designer Arm 's (NASDAQ: ARM ) shares leapt to $63.59 on their first trading day last week, but have since slipped closer to its offer price of $51.

4. Disney unveils theme park plans, shares drop

Shares in Walt Disney (NYSE: DIS ) fell on Tuesday after the entertainment giant announced plans to spend around $60B on expanding its theme parks, cruise lines and resorts over the next decade.

New projects at locations in the U.S. and abroad could help drive returns, Disney said, adding that popular franchises like "Frozen" and "Black Panther" could have a possible presence at its parks in the future. The investment boosts a division that has been a strong performer for the company, offsetting weakness at its traditional television business and streaming services as well as disappointing ticket sales for recent movie releases.

Operating income from the parks has topped the profit garnered by the so-called linear TV unit over the past three quarters, thanks in large part to a post-COVID jump in visitors.

However, analysts at Citigroup (NYSE: C ) said in a note that investors were potentially worried about pressure on free cash flow stemming from the heavier spending on parks.

5. Oil slips; Fed in focus

Oil prices fell Wednesday, pulling back from 10-month highs, as markets digested a forecast of a large drawdown in U.S. crude inventories ahead of the Federal Reserve interest rate decision.

Data from the industry body American Petroleum Institute, released on Tuesday, indicated that U.S. crude inventories fell by over 5 million barrels last week. The official data is due later on Wednesday.

Yet, despite this hefty draw, traders are seemingly taking some profit ahead of the crucial Fed decision after worries of a substantial supply deficit this year had sent prices soaring to their highest levels since November last year.

By 05:28 ET, the U.S. crude futures traded 1.3% lower at $89.33 a barrel, while the Brent contract dropped 1.2% to $93.19.

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