Stock market news live updates: Stock futures drift ahead of Fed decision

Stock futures opened little changed Tuesday evening as traders stood by for the Federal Reserve's latest monetary policy decision and updated economic outlook on Wednesday.

Contracts on the S&P 500 drifted flat to slightly lower. Earlier, the index closed higher by more than 2%, gaining for the first time in four sessions as volatility gripped U.S. equities. The Nasdaq Composite also ended a three-session losing streak to end nearly 3% higher.

Energy prices unwound more recent gains, and West Texas intermediate crude oil futures settled more than 6% lower to reach $96.44 per barrel at settlement Tuesday afternoon. This brought U.S. crude oil into a bear market, with prices down by more than 20% from a recent closing high a week ago. Brent crude, the international standard, sank to fall below $100 per barrel for the first time in more than two weeks.

Investors this week have been gearing up to receive the Federal Reserve's latest monetary policy decision Wednesday afternoon, which is likely to show the first of multiple interest rate hikes this year. Currently, the benchmark interest rate has been kept near zero since mid-2020, with the central bank using low rates and a series of other monetary policy tools to keep financial conditions running smoothly amid the pandemic. The Fed last raised interest rates in 2018.

Already, Fed Chair Jerome Powell told Congress in recent weeks that he would back a 25 basis point interest rate hike. Such an increase would be in-line with the Fed's typically hike size per meeting over the past two decades, and would begin the process of tightening financial conditions to gradually bring down demand and inflation while averting a shock to markets already reeling from Russia's invasion Ukraine.

And importantly, in addition to delivering a decision on raising rates, the Fed will also release an updated Summary of Economic Projections, or "dot plot," showing central bank officials' thinking on where interest rates and growth in the economy may be headed this year. And to that end, many pundits expect to see the Fed upgrade its outlooks on inflation and the labor market this year.

The core Personal Consumption Expenditures (PCE) — or the Fed's preferred inflation gauge excluding volatile food and energy prices — last rose at a 6.1% annual rate in January. And since then, more recent prints on consumer and producer price inflation has pointed to even steeper run-up in prices.

"The dot plot should increase given all the news that we've had between December and today," Michael Kushma, Morgan Stanley Investment Management chief investment officer, told Yahoo Finance Live on Tuesday. "We've got a strong labor market, higher than expected inflation. Oil prices, energy prices, commodity prices are much higher now then they were back then. All of it suggests that the Fed needs to get going, and that they need to up the dot plot. So I think they'll talk about the mean, maybe five rate hikes in 2022, and a couple more in 2023."

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