US stocks open higher before key Fed decision, projections

By Ovunc Kutlu

ANKARA (AA) – The US stocks opened higher on Wednesday as markets await the Federal Reserve's interest rate decision and key macroeconomic projections.

The Dow rose 127 points, or 0.42%, to 30,833 at 9.39 a.m. EDT. The S&P 500 added 15 points, or 0.41%, to 3,871.

The tech-heavy Nasdaq increased 16 points, or 0.15%, to 11,441.

The Fed is likely to make a 75-point rate hike at the conclusion of its two-day meeting later Wednesday.

However, the probability of the central bank raising rates by 100 basis points still stood at 18% shortly after market opening, according to the FedWatch Tool provided by US-based global markets company Chicago Mercantile Exchange Group. If realized, this would be the largest rate hike since February 1989.

Investors will more importantly focus on the Fed's projection figures, as the central bank could signal a higher terminal rate.

The terminal rate, the peak spot where the federal funds rate are expected to climb before they are trimmed back, was expected to be 3.4% for 2022 and 3.8% for 2023, according to the Fed's summary of economic projections in June.

Those rates are now estimated to be above 4%, and could even be as high as 5%, according to some analysis, as the Fed continues to struggle to put downward pressure on high inflation.

Annual consumer inflation hit 8.3% in August, above the estimate of an 8.1% increase.

The VIX volatility index, also known as the fear index, fell 1.6% to 26.73. The 10-year US Treasury yield declined 0.9% to 3.540%.

The dollar index increased 0.5% to 110.78, near its highest level in 20 years, while the euro was down 0.7% to $0.9900 against the greenback.

Precious metals bounced back from their losses in recent days, with gold adding 0.5% to $1,673 and silver rising 0.9% to $19.46.

Oil prices were up more than 1%. Global oil benchmark Brent crude was trading at $91.82 a barrel for a 1.3% gain. US benchmark West Texas Intermediate was around $84.94 – up 1.2%.