Fed’s policy meeting in focus
U.S. stock futures were trading lower on Tuesday morning, ahead of a key monetary policy meeting by the Federal Reserve. Market participants expect the central bank to keep its benchmark interest rate near zero at the two-day meeting which kicks off later in the day.
However, Fed chairman Jerome Powell could provide additional details on the policy moves the bank expects to make next to shield the U.S. economy from the most devastating consequences of the COVID-19 pandemic.
By 5:30 a.m. ET, futures tied to the blue-chip Dow were down 259 points, or 0.94% to 27,268. S&P 500 futures traded 26.38 points, or 0.82% lower to 3,201.12 while the tech-heavy Nasdaq 100 futures dropped 47.13 points, or 0.48% to 9,837.62.
NBER says U.S. entered recession in February
The U.S. officially entered an “unprecedented” recession in February according to the National Bureau of Economic Research, a private research group that tracks peaks and troughs of business cycles.
“The unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions,” NBER said in a statement Monday.
That means the economic expansion which started in June 2009 lasted for 128 months until hurt by the COVID-19 pandemic. That is a record, besting the 120 months from March 1991 to March 2001.
NBER defines a recession as “a decline in economic activity that lasts more than a few months,” and the group generally waits longer prior to making a determination.
Crude falls as Goldman Sachs warns prices are set for a slump in the near-time
Meanwhile, crude futures were also lower early Tuesday after Goldman Sachs (NYSE: GS) said that oil prices are likely to pull back in the coming weeks because of a “daunting” inventory overhang and the uncertain path of future demand.
“The collapse in refining margins to unprecedented lows is reflective of both over-valued crude prices as well as a more moderate demand recovery, two pillars of our short-term bearish view,” Goldman Sachs said in a note dated Monday.
“This rebound has been fueled by a macro risk-on backdrop and a policy induced Chinese crude import binge, yet fundamentals are turning bearish,” the bank added.
Goldman expects Brent crude prices to hit $35 per barrel in the short term, and $40.40 by the end of the year. Its 2020 forecast for West Texas Intermediate (WTI) crude is $36 a barrel.
By 5:30 a.m. ET, WTI crude futures were at $37.47, down 72 cents, or 1.89% a barrel. Brent crude futures were down 54 cents, or 1.32% to $40.26 per barrel.
