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By Chris Matthews and Barbara Kollmeyer, MarketWatch

All eyes are on the Federal Reserve

U.S. stock futures indicated a higher start for Wall Street Wednesday, with fresh trade-deal optimism helping to lift sentiment as investors await the outcome of a key policy announcement from the Federal Reserve.

How did the benchmarks perform?

Dow Jones Industrial Average futures rose 151 points, or 0.6%, to 23,748, while S&P 500 futures rose 16 points, or 0.6%, to 2,552. Nasdaq-100 futures climbed 37 points, or 0.6%, to 6,500.

On Tuesday, the Dow Jones Industrial Average finished up 0.4% to 23,675.64, while the S&P 500 index rose less than a point to close at 2,546.16. The Nasdaq Composite Index climbed 0.5% to 6,783.91.

What's driving the market?

U.S. Treasury Secretary Steven Mnuchin gave investors reason for optimism regarding U.S.-China trade relations, when he said the U.S. and China will meet in January to broker a trade-war truce, in an interview with Bloomberg News on Tuesday. Previously, the Trump Administration hadn't given a specific timetable for face-to-face negotiations.

The interview helped power technology stocks higher in late-Tuesday trade, but the ability of policy makers to instill lasting investor confidence with reassuring words, but not concrete policy changes, has been waning in the weeks since President Donald Trump and Chinese President Xi Jinping last met on the sidelines of a recent G-20 summit.

(https://www.bloomberg.com/news/articles/2018-12-18/mnuchin-says-china-and-u-s-planning-for-trade-talks-in-january) (https://www.bloomberg.com/news/articles/2018-12-18/mnuchin-says-china-and-u-s-planning-for-trade-talks-in-january)Mnuchin also said he blamed market volatility on the effect of the financial-crisis-era Volcker rule and high-frequency trading, which he said combined to sap liquidity in the market (http://www.marketwatch.com/story/mnuchin-has-a-simple-reason-why-the-dow-is-poised-for-its-worst-december-since-1931-2018-12-18).

Traders are hopeful that the Federal Reserve will help calm what has been a tumultuous atmosphere for investors in the past several weeks. The central bank's interest-rate setting committee, the FOMC, will conclude its two-day meeting Wednesday and announce a decision on whether to raise interest rates Wednesday at 2 p.m.

CME Group data (https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html), gauging Federal-funds futures, indicate an 66.3% likelihood that the Fed will raise rates 0.25% Wednesday, as prominent voices, including the Wall Street Journal's editorial page (https://www.wsj.com/articles/time-for-a-fed-pause-11545092108), called for the Fed to pause amid signs of slowing economic growth.

But if the Fed does hike, investors hope the central bank will make dovish noises on future policy intentions. Investors will be watching closely for the Fed's statement it issues to accompany the interest-rate decision, as well as a news conference at 2:30 Wednesday, where Federal Reserve Chair Jerome Powell will discuss future interest rate increases.

What are the strategist saying?

"Every bull market ends with a Fed policy mistake--it's just the way it is. Evidence is mounting that we may be on the cusp of that policy mistake, as it appears the Fed has overestimated the strength of the economy amidst several headwinds," Tom Essaye, president of the Sevens Report wrote in a Wednesday note to clients.

"To be clear, current economic data remains, generally, solid. But the marginal direction of change has turned decidedly lower," he wrote.

He went on to argue that the major unknown variable is whether or not the Fed will stick to its policy of gauging the economy using hard, but backward-looking, data on economic and job growth, or "recognize that, over the past few months, a serious economic headwind has kicked up," as evidenced by slowing growth abroad, declining inflation expectations and oil prices that have fallen more than 30% over the past three months.

What stocks are in focus?

Shares of FedEx Corp.(FDX) are falling 6.4% in premarket trade Wednesday, after the logistics company announced Tuesday evening (http://www.marketwatch.com/story/fedex-slashes-profit-targets-will-offer-buyouts-2018-12-18) that it was lowering its guidance for 2019 and that it was starting a voluntary buyout program for some U.S. workers.

Facebook Inc. (FB) stock is in focus after the New York Times reported (https://www.nytimes.com/2018/12/18/technology/facebook-privacy.html?action=click&module=Top%20Stories&pgtype=Homepage) that the company shared user data with large tech companies to a greater degree than it had previously disclosed. The stock is down 1.7% in premarket action.

Pfizer Inc. (PFE) shares are rising 2% in premarket trade, after the firm announced a plan to combine its consumer health unit with that of GlaxoSmithKline Plc,(GSK.LN) with Pfizer taking a minority stake in the new enterprise.

Shares of Micron Technology Inc. (MU) are falling more than 7% in premarket trade, after the chip maker lowered its fiscal second-quarter outlook Tuesday evening.

General Mills Inc. (GIS) shares are rising 4.6% in premarket trade Wednesday, after the consumer foods company reported an earnings beat (http://www.marketwatch.com/story/general-mills-stocks-jumps-after-profit-beat-but-sales-comes-up-shy-2018-12-19) earlier in the morning.

Shares of Medtronic Plc(MDT) are up 3.6% in premarket trade, after the firm announced the completion of a $1.7 billion deal to acquire Mazor Robotics.

Eli Lilly and Co. (LLY) stock is up 3% before the bell Wednesday, after the pharmaceutical company issued optimistic 2019 guidance (http://www.marketwatch.com/story/eli-lillys-stock-gains-after-upbeat-profit-and-revenue-outlook-raised-dividend-2018-12-19) and raise its dividend by 15%.

What data are in focus?

Other than the Fed decision due at 2 p.m. Eastern Time, investors are also looking forward to the National Association of Realtors estimate for existing home sales in the month of November, to be released at 10 a.m.

The Commerce Department reported that the U.S. trade deficit increased to $124.8 billion in the third quarter, up from $101.2 billion the second quarter of 2019.

How are other markets trading?

Optimism didn't exactly extend to Asian markets (http://www.marketwatch.com/story/asian-markets-mixed-ahead-of-fed-rate-decision-2018-12-18), which were a mixed bag with Japan's Nikkei shedding 1% and China's Shanghai Composite Index off 0.4%.

In Europe, stocks are mostly higher, with both the Stoxx Europe 600 and FTSE 100 advancing on the day.

Crude-oil prices (https://www.bloomberg.com/news/articles/2018-12-18/even-stan-druckenmiller-doesn-t-know-where-markets-go-next?srnd=premium-europe) were modestly higher, while the ICE Dollar Index and (http://www.marketwatch.com/story/asian-markets-fall-ahead-of-xi-speech-fed-meeting-2018-12-17) (https://www.bloomberg.com/news/articles/2018-12-18/even-stan-druckenmiller-doesn-t-know-where-markets-go-next?srnd=premium-europe) (https://www.bloomberg.com/news/articles/2018-12-18/even-stan-druckenmiller-doesn-t-know-where-markets-go-next?srnd=premium-europe) (https://www.bloomberg.com/news/articles/2018-12-18/even-stan-druckenmiller-doesn-t-know-where-markets-go-next?srnd=premium-europe)gold futures edged lower.

(END) Dow Jones Newswires

December 19, 2018 08:53 ET (13:53 GMT)

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