US Stocks Treading Water Ahead of Fed Minutes after Tuesday’s Mixed-to-Bearish Performance

The major U.S. stock index futures are inching lower early Wednesday after posting a mixed performance the previous session. Some traders are anticipating a directionless market after the cash market opening as they await the release of the Fed’s latest minutes at 18:00 GMT.

Investors will be listening for more clues on the direction of the Federal Reserve’s monetary policy when it releases its latest meeting minutes Wednesday afternoon, which could be a catalyst for a move in both bonds and stocks.

At 03:37 GMT, September E-mini S&P 500 Index futures are trading 4333.00, down 1.00 or -0.02%. September E-mini Dow Jones Industrial Average futures are at 34443, down 17 or -0.05% and September E-mini NASDAQ-100 Index futures are trading 14786.75, up 11.25 or +0.08%.

According to CNBC, the Fed’s minutes are expected to be dovish with the central bank looking for progress in the labor market and not worried that recent inflation will become a persistent trend. Slowing down the bond buying would be the Fed’s first major retreat from the easy policies it put in place when the economy shut down last year.

The end of the Fed’s $120 billion a month in Treasury and mortgage purchases would also signal that the central bank’s next move could be to raise interest rates.

Tuesday Recap

The Dow and S&P 500 fell on Tuesday, with financials and other groups closely tied to economic growth leading declines, while the NASDAQ edged higher to another closing record.

The S&P 500 banks index fell 2.5% as U.S. Treasuries rallied, with the 10-year yield hitting its lowest level since February 24.

The Dow led the day’s declines. Financials sank 1.6%, the biggest weight on the S&P 500 followed by energy shares.

Investors Dealing with New Headwinds

U.S. services industry activity grew at a moderate pace in June, likely restrained by labor and raw material shortages. Adding to investor caution, a regulatory crackdown by Beijing drove a selloff in shares of several U.S.-listed Chinese firms, including Didi Global Inc. Some investors may have lightened up on their positions amid new worries the economy might not be as good as the stock market is indicating. Investors could also be taking profits and squaring positions ahead of the start of second quarter earnings season.

Volatility Rises

On Tuesday, the CBOE Volatility Index, and options market gauge of expectations for near-term volatility, rose 1.37 points to close at 16.44, its highest close in two weeks, highlighting investors’ jangled nerves.