US pre-open: Stocks seen muted as investors eye Fed announcement
US futures pointed to a muted open on Wall Street on Wednesday, with investors likely to err on the side of caution ahead of the latest policy announcement from the Federal Reserve.
At 1110 BST, Dow Jones Industrial Average, S&P 500 and Nasdaq futures were all flat.
The Fed is widely expected to stand pat on interest rates, but the central bank may well outline plans to wind down its balance sheet.
Richard Perry at Hantec Markets said: "This could be an historic meeting today. Even though there is no expectation of a rate hike, the meeting could include the official announcement that the Fed will begin to reduce the size of its balance sheet. Quantitative easing by the world’s most important central bank has been seen as a supportive pillar for financial markets over the past nine years. The impact of the reversal of this process, through “quantitative tightening” could become an intriguing factor that plays out for years to come. The move has been well telegraphed by the Fed, starting slowly with $10bn reduction per month, ramping up every quarter, so the impact is unlikely to be a near term factor.
"The market reaction will not be on the balance sheet reduction, unless it is delayed (possible and dovish), or much faster than previously touted (highly unlikely and hawkish). The reaction will come more from the changes to the growth and inflation forecasts, along with the moves on the dot plots. Persistent low inflation has been a problem for the Fed and this could be reflected in a lower average on the dot plots which could reflect a shallower tightening cycle, especially if the terminal interest rate is reduced from 3.0%."
In corporate news, American Outdoor Brands was higher in pre-market trade following reports late on Tuesday that President Trump will ease rules on gun exports.
Retailer Bed Bath & Beyond tanked nearly 14% after its earnings late on Tuesday missed analysts' expectations. The company said same-store sales declined 2.6% in the second quarter, versus expectations of a 0.7% drop, while sales of $2.9bn fell short of estimates of $3bn.
Elsewhere, FedEx could be in focus after its earnings late on Tuesday also disappointed and the company cut its profit forecast for the year as it took a hit from a cyber attack.
On the data front, existing home sales are at 1500 BST, while the Fed's rate announcement is at 1900 BST and the press conference is at 1930 BST.