S&P 500 futures rose on Wednesday ahead of the Federal Reserve's monetary policy decision. The fact that the growth was minimal and was not particularly supported by major players may create additional problems for the market to exit from the steep peak that we have been experiencing since the beginning of September this year. Dow Jones Industrial Average futures rose 200 points (or 0.6%). S&P 500 futures added 0.5%. Nasdaq 100 futures gained 0.3%.
Let me remind you that this month the S&P 500 index fell by 3.7%, including a drop of 1.7% this Monday, which was the worst day since May of this year. Yesterday, the main indices tried to bounce back but failed: the Dow and the S&P 500 closed in the red for the fourth day in a row, and in September, the index lost 4% already.
The reason for the sharp decline in the indices was the Chinese developer Evergrande, which was threatened with a possible default if it could not pay millions of dollars on debt denominated in US dollars this week. However, according to the latest news, the Central Bank of China has already pumped 120 billion yuan into the system, some of which will go to the rescue of Evergrande. So the beginning of the crisis is canceled. Immediately after that, Evergrande announced that it was ready to make all payments for obligations. I don't think it's a coincidence. Meanwhile, Evergrande's shares in Hong Kong have lost more than 90% since July 2020, and the Chinese authorities are likely to nationalize the company.
Commodity-related stocks recovered slightly in the premarket as concerns about the ripple effect from Evergrande eased. Freeport-McMoRan, Occidental Petroleum, and Exxon were the first to compensate for the losses partially, but shares of Chinese Wynn Resorts fell by more than 1%.
Investors have already turned their attention to the meeting of the Federal Reserve System, which will end today. Chairman Jerome Powell will speak immediately after the publication of the interest rate decisions. The central bank faces a difficult task to calm the markets during a turbulent month and at the same time prepare investors for the cancellation of some monetary incentives. Powell previously stated that the reduction of the Fed's emergency spending for $ 120 billion could begin as early as this year. If the committee decides to start reducing the bond purchase program as early as November of this year, this will be the end of the story about the "further significant progress" that the Central Bank has been striving for, setting goals for the labor market and inflation. If the announced dates coincide with the expectations of traders – this is December 2021, most likely, the stock market reaction will be more restrained, and, perhaps, we will even see short-term growth.
As for the technical picture of the S&P 500, it's time to look at the level of 4,231, to which the movement may occur tomorrow. However, this will happen after the breakdown of the 4,300 level and provided that the Federal Reserve System seriously announces plans to curtail measures to support the economy. It will be possible to say that the market has recovered a little only after traders confidently return the index above the mark of 4,425, which will open the way for 4,475 and 4,525.