Stocks were indicated to open higher Wednesday as index futures rose in premarket trading following reports that first-quarter U.S. gross domestic product rose by a better than expected 0.6%, and ADP's private employment index showed payrolls rose 6,000 in April. Some market players contend the data will allow the Federal Reserve to pause in rate-cutting cycle.
Wednesday's big event, of course, is the Fed's 2:15 pm ET policy announcement. The market is betting Fed policymakers will lower its target on the federal funds rate by 25 basis points to 2.0% and announce it will hold off on further rate moves to see if the economy improves. The market is also awaiting a later report that is expected to show the April Chicago purchasing managers' index fell to 46.0 from 48.2 in March.
Bonds were higher, as was the dollar. Gold futures were off. Oil futures were up before inventory data.
On Tuesday, the blue-chip Dow Jones industrial average fell 39.81 points, or 0.31%, to 12,831.94. The broader S&P 500 index declined 5.43 points, or 0.39%, to 1,390.94. The tech-heavy Nasdaq composite index added 1.70 points, or 0.07%, to 2,426.10.
Advance first-quarter GDP rose 0.6%, vs. consensus expectations for a 0.5% rise. The deflator was up 2.6%, vs. consensus for a 3.0% reading. Elsewhere, the first-quarter headline PCE price index was at 3.4%, unchanged from the prior-quarter reading, while the core figure, which excludes food and energy prices, came in at 2.0%, versus Q4 2.1%.
U.S. employment cost index ECI slowed to a 0.7% rate in the first quarter, from 0.8% in the preceding quarter. Wages and salaries were steady at a 0.8% pace, while benefits slowed to 0.6%. On a year-over-year basis, ECI held at a 3.3% rate, the same as the prior three quarters. Wages and salaries slowed to a 3.2% rate, from 3.4% previously, while benefit costs accelerated to a 3.5% rate, from 3.1% previously.
The U.S. ADP private payroll survey showed jobs rose 10,000 in April, from a revised 3,000 increase in March (8,000 previously). The data are nevertheless stronger than expected and should weigh on Treasuries and support further gains in the dollar, says Action Economics.
The U.S. MBA mortgage market index sank 11.1% for the April 25 week, while the purchase index fell 4.8% and the refinance index plunged 16.2%. Average mortgage rates actually retreated slightly after a big jump the week prior, with the 30-year fixed rate down 3 basis points to 6.01%, the 15-year fixed off 7 basis points to 5.53% and the 1-year ARM down 7 basis points to 6.86%.
June NYMEX crude was set to open the NYMEX session up about 65 cents per barrel at $116.30. Buyers came in following the U.S. GDP data, according to Action Economics. Action expects price action to be relatively subdued ahead of the 10:30 EDT release of weekly Energy Dept. inventory data.
Among Wednesday's stocks in the news, General Motors (GM) reported an adjusted first-quarter loss from continuing operations per share of 62 cents, vs. a one-cent loss one year earlier, on a 1.7% revenue drop. The company noted improved adjusted automotive operating performance, rapid growth in emerging markets, continued cost performance in GM North America, and liquidity of nearly $24 billion, despite the impact of the American Axle strike on North American operations and weakness in the U.S. auto industry.
Time Warner (TWX) reported a 36% decline in first-quarter profits Wednesday following an asset sale a year ago and said it would spin off the rest of its cable business. Revenues rose 2% to $11.42 billion from $11.18 billion.
European stock indexes were mixed Wednesday. In London, the FTSE 100 index declined 0.29% to 6,071.60. In Paris, the CAC 40 index gained 0.11% to 4,982.75. Germany's DAX index rose 0.12% to 6,893.60.
Asian indexes finished lower. Japan's Nikkei 225 index declined 0.32% to 13,849.99. In Hong Kong, the Hang Seng index fell 0.61% to 25,755.35.
Treasury Market
The 10-year yield initially bounced above 3.82% after the GDP release, only to pull back toward 3.80% again, reports Action Economics. Yields seem likely to remain in a tight holding pattern until the Fed decision this afternoon.