By Saumya Vaishampayan
U.S. stock futures held steady Wednesday ahead of a Federal
Reserve decision that is likely to end its latest bond-buying
program.
The Fed's unprecedented monetary stimulus, which included three
rounds of bond-buying programs since the financial crisis, has been
credited in part with fueling stock-market gains in the period.
Dow Jones Industrial Average futures added seven points to
16943. S&P 500 futures fell two points, or 0.1%, to 1978 and
Nasdaq-100 futures declined seven points, or 0.2%, to 4087. Changes
in stock futures, however, don't always accurately predict stock
moves after the opening bell.
Facebook Inc. shares dropped 7.3% in premarket trading, weighing
on the S&P and Nasdaq. The social network said costs rose 41%
in the third quarter and finance chief David Wehner said he expects
Facebook to incur higher expenses than normal in the coming
quarters because of big investments.
Stocks rallied on Tuesday, with the Dow gaining 1.1% to close at
17005.75. The Nasdaq rose 1.7% to 4564.29 and the S&P 500
advanced 1.2% to 1985.05.
Stocks have whipsawed since mid-September, when the Dow and the
S&P closed at all-time highs. Stocks subsequently plunged,
hitting a low about a month later, amid fears of slowing global
growth. In the past two weeks, stocks have broadly recovered as
investors focus on U.S. corporate earnings, with Tuesday's gains
carrying the S&P 500 and the Nasdaq Composite into positive
territory for October, but still below levels seen in September.
The Dow remains down 0.2% for October and off 1.6% from its Sept.
19 record, as of Tuesday's close.
That market volatility is likely to continue as Federal Reserve
officials now begin to debate when to raise short-term interest
rates, which have been near zero since December 2008, said Steven
Wieting, global chief investment strategist at Citi Private
Bank.
"Monetary policy just can't be as certain as it's been," he
said. "It just can't be as clear and supportive for easy financial
conditions across asset classes."
Fed officials have been winding down the bond-buying program all
year. At their September meeting, policy makers decided to
completely end those purchases after this month if the economy
continued to improve.
Ahead of the Wednesday afternoon statement on monetary policy,
it is considered certain that the Fed will end its latest
bond-buying program. But recent comments from Fed officials show
that bond purchases, or quantitative easing, will remain in the
central bank's tool kit.
The end of the bond-buying program sets up for an eventual
increase in interest rates, widely expected sometime next year.
Investors will be parsing the Fed statement for guidance on when
short-term rates could rise.
"The initial move up in short rates is not likely to be a
disaster for the economy, and therefore not for equities," said Mr.
Wieting. That's because tightening monetary policy is usually
driven by strong economic growth. "But it does add to volatility,"
he said.
The Stoxx Europe 600 rose 0.4%, boosted in part by positive
earnings from Danish logistics company DSV AS.
In commodity markets, crude-oil futures rose 1% to $82.18 a
barrel. Crude-oil prices tumbled this month, hitting a 2014
settlement low of $80.52 a barrel on Oct. 22, weighing on stocks of
energy companies. "Figuring out where the bottom is in oil is key
in the marketplace," said Mr. Wieting of Citi Private Bank.
Gold futures inched down 0.2% to 1227.50 an ounce.
The yield on the benchmark 10-year Treasury note rose to 2.291%
from 2.284% on Tuesday. Yields rise as prices fall.
In corporate news, health insurer WellPoint Inc. raised its
outlook after reporting better-than-expected quarterly earnings.
Shares were unchanged in premarket trading.
Hershey Co. reported a 5.8% increase in sales in the latest
quarter. But the company lowered its guidance for the year because
of lower-than-expected international sales amid macroeconomic
challenges. Shares fell 3.7% in premarket trade.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com