US stock futures are under pressure ahead of the Federal Reserve meeting, as surging energy prices and geopolitical conflicts drive the reassessment of inflation expectations, becoming a core variable for the market.
Market Performance
Dow futures fell 0.22%, S&P 500 futures dropped 0.30%, and Nasdaq futures slid 0.39%. Small-cap futures fell even more, reflecting a decline in risk appetite.
The volatility index VIX rose to 24.06, indicating an increase in market risk aversion.
Oil Prices and Inflationary Pressure
Brent crude prices are nearing $100 per barrel due to transportation risks in the Strait of Hormuz. Rising energy prices intensify inflation concerns and reshape market expectations for monetary policy.
Analysts point out that if oil prices remain high, it will suppress economic growth and increase the pressure on central banks to maintain tight policies.
Hawkish Shift in Interest Rate Expectations
According to LSEG data, the market currently only prices in one 25-basis-point rate cut within the year, significantly below previous expectations. This shift reflects investors' repricing for the continuation of a "high-interest-rate environment."
It is widely expected that the Federal Reserve will maintain rates at this meeting, but the policy language may lean cautious or even hawkish.
Sector and Stock Performance
The energy sector rose, with Occidental Petroleum and EQT each up about 1%. Technology stocks saw a pullback after the previous day's gains, with Nvidia flat pre-market while AMD and Broadcom weakened.
The travel and consumer sectors were under pressure, with Delta Air Lines and Carnival Cruise Line each down about 1%.
On the other hand, Uber rose over 2%, boosted by its self-driving taxi plans; Beyond Meat fell about 6% due to delayed earnings and revenue falling short of expectations.
Geopolitical and Policy Uncertainty
Escalating Middle East conflicts, coupled with international coordination differences, heighten concerns about energy supply and the global economic outlook. Meanwhile, the postponement of high-level US-China meetings also increases policy uncertainty.
Analysts indicate that the market has not fully priced in the potential impact of war on the global economy, suggesting that future volatility may further intensify.
