US pre-open: Stocks to bounce back from Monday's rout ahead of Fed
US stocks looked set for a positive open on Tuesday following heavy losses in the previous session, although investors were likely to exercise caution ahead of this week's Federal Reserve policy announcement.
At 1215 GMT, Dow Jones Industrial Average and S&P 500 futures were up 0.4%, while Nasdaq futures were 0.5% firmer. On Monday, the S&P 500 closed at its lowest level in 14 months amid worries about economic growth, while the Dow fell to its lowest level since March.
In Asia, meanwhile, stocks slumped as a speech by Chinese President Xi Jinping failed to boost sentiment. In an address to commemorate the 40th anniversary of China's economic reforms, Xi called for China to "stay the course" on its current path of reform and said "no one is in a position to dictate to the Chinese people what should or should not be done". However, market participants were left disappointed after Xi failed to mention any new reforms or stimulus.
Oanda analyst Craig Erlam said: "US equity markets are poised to open a little higher on Tuesday, paring losses on another bad day for Wall Street but how long will it last?
"There is a lot of pessimism in the markets right now and while the Fed - or more accurately, its chairman - may have been the trigger, I wonder whether they may be nothing more than a scapegoat, with his comments being the straw that broke the camel’s back. Powell has since dialled back - or clarified - his hawkish views on interest rates and yet, the sell-off continues.
"There was no pessimism earlier in the year, despite expectations of a December hike and more next year generally existing. Now we find ourselves in a situation whereby a hike tomorrow is not fully priced in and, if it does happen, no more are priced in for 2019. And still, the sell-off continues. It’s for this reason that I wonder whether there’s anything the Fed can do tomorrow to salvage the Santa rally that’s so far eluded hopeful investors."
Erlam said a dovish hike seems to be the base expectation in the markets, alongside projections that confirm a slowdown in the US next year.
"As ever, the dot plot will be central to the reaction, with markets pricing in a 60% chance of no hike next year. I don’t think the Fed will pare back its expectations that much, having previously factored in three for next year. The question now is how dovish the central bank will be and how much it will align with markets."
Energy-related shares were likely to feel the pinch as oil prices slid amid supply glut worries, with West Texas Intermediate down 2.9% to $48.46 a barrel and Brent crude 2.7% weaker at $58.04.
Elsewhere, software company Oracle Corp surged in pre-market trade after better-than-expected third-quarter earnings late on Monday.
Shares in Olive Garden parent Darden Restaurants were likely to be active following the release of its second-quarter numbers.
On the data front housing starts and building permits are at 1330 GMT.