US stock futures and Treasury markets are finding a temporary reprieve on Wednesday after a stretch of heavy selling, with traders holding their breath for the Federal Reserve's latest rate decision and updated economic projections to set the near-term tone. As of writing, Dow futures are up 0.26%, S&P 500 futures are up 0.25%, and Nasdaq futures are leading with a 0.51% gain.

The MSCI global equity index has added 0.1% after back-to-back daily declines, while an Asia-Pacific equity index (excluding Japan) has risen 0.6%, snapping a four-day losing streak. European markets are opening mostly higher, with the pan-European Stoxx 600 up 0.3%.

In pre-market trading, the spotlight is on Intel, whose shares are jumping more than 5%. The chipmaker is reportedly in talks with South Korea's SK Hynix to have the memory-chip producer manufacture storage chips on US soil for the first time. In contrast, software stocks are lagging behind.

Carol Schleif of BMO Wealth Management commented: "We expect equity markets to remain volatile over the next few weeks until we truly enter earnings season and the market regains fundamental support. Until then, investors can only continue to focus on midterm election rhetoric and anxiety over inflation data, looking for clues on whether further rate hikes are coming."

Oil prices dip below $108

The easing in oil prices is helping to stabilize market sentiment, with Brent crude slipping below $108 per barrel. Reports that Saudi Arabia is offering additional crude supply via Oman are tempering worries about the scale of supply disruptions. The decline follows US industry data showing crude inventories rose by 7.1 million barrels last week.

Brent had rallied more than 4% over the past two sessions on supply concerns, pushing its relative strength index above 70—a technical signal often pointing to short-term pullbacks and suggesting the recent surge may have been overdone. US retail sales figures are due out ahead of the stock market open, and Bloomberg Economics argues the data may not give the Fed much reason to worry about softening demand. Economist Eliza Winger expects a strong rebound in August nominal retail sales, with higher prices and seasonal factors both boosting the numbers.

Fed decision countdown

The central bank will announce its policy decision later on Wednesday, followed by a press conference with Fed Chair Kevin Warsh. Markets overwhelmingly expect the Fed to raise rates for the first time since 2023, as policymakers grow increasingly skeptical that inflation can cool sufficiently without further tightening. Surging oil prices have intensified worries about reaccelerating price pressures, driving bond yields to multi-decade highs and keeping equity markets under pressure.

Michaël Nizard, head of multi-asset at Edmond de Rothschild Asset Management in Paris, noted: "A rate hike now is a credibility issue for him. If there is no hike tonight, it could pose a problem for the Fed's credibility, independence, and for the stock market." He added: "This is also about the Fed's policy guidance and reaction function. It's very hard to describe exactly what reaction function the Fed is following right now."

President Trump has repeatedly called for lower rates, saying last month that US trade would stop with countries running surpluses if the Fed doesn't cut. Traders have largely ignored those remarks and are pricing in a hike as nearly inevitable. According to the CME Group FedWatch tool, the market assigns a 92.5% probability to a 25-basis-point hike at this meeting, up from 61.2% a week ago, and has fully priced in another hike by December.

Kevin Thozet, a member of the investment committee at Carmignac, said: "Above-target inflation, rising energy and commodity prices, full employment, and an exceptionally strong economy all combine to demand further monetary policy tightening from the Fed."

Dollar steady, yields hold at highs

Treasury prices are broadly unchanged, keeping the 10-year yield at 5.00%. On Tuesday, the yield broke above that threshold for the first time in three years and touched its highest level since 2007. Ven Ram, a cross-asset strategist at Bloomberg, pointed out: "Long-term yields are already at multi-year highs. While traders who were short duration may lean toward reducing some positions today, whether the market narrative can truly turn depends on whether central banks can demonstrate resolve in fighting inflation and rebuild some policy credibility."

The dollar is little changed, with the yen hovering near 155 per dollar after two straight sessions of weakness. Investors await the Bank of Japan's policy decision on Friday, with expectations for a hike to the highest level in 31 years. UK stocks are higher and the pound is flat, as the latest UK inflation data did little to shift expectations for the Bank of England's decision on Thursday, where rates are widely expected to remain on hold, though another hike by year-end is still anticipated.

Analysts at UBS Global Wealth Management said in a note: "If the Bank of England signals future hikes amid rising inflation and energy prices, the pound could strengthen in the coming weeks. Meanwhile, if the BOJ's signal is less hawkish than current market expectations, the yen could weaken." With Middle East conflicts causing fuel supply disruptions and amplifying concerns about energy-driven inflation, central banks globally are assessing whether further tightening is necessary. Bitcoin is extending its slide, trading around $75,800, following a sharp selloff in crypto markets after the US Senate voted against advancing a comprehensive crypto bill backed by President Trump.

Nomura flips hawkish: two hikes this year

Nomura, traditionally one of the more dovish voices on Wall Street, has taken an unusual step by reversing its previous no-change stance on rates and turning fully hawkish. The firm's latest research indicates the Fed will hike by 25 basis points twice this year—in September and December—extending the tightening cycle further than previously thought.

This dramatic about-face is driven by two key real-world factors: signs that the US fight against inflation is stalling, and a more distinctly hawkish communication style from the Fed's core leadership. In Nomura's view, the stalling of downward inflation momentum is fundamentally forcing the Fed to reopen the tightening valve. Additionally, the tough tone conveyed by Warsh represents a substantial gap from the market's prior bet on a "prolonged pause," directly breaking the balance of maintaining the status quo.

Jefferies sees S&P 500 at 8,000: don't fight the earnings cycle

Jefferies predicts the S&P 500 will surge to 8,000 by the end of this year and reach 9,000 by 2027, driven by the AI investment frenzy and better-than-expected corporate earnings. The report argues that despite headwinds such as rising 10-year Treasury yields, sticky inflation, and midterm elections, corporate fundamentals remain the core driver of returns.

The firm's logic is clear: in an earnings cycle growing at more than double the historical average, fighting the earnings trend is dangerous. Jefferies also believes AI-driven earnings expansion is broadening from the Magnificent Seven into the wider market, providing a more solid foundation. It recommends maintaining an overweight stance on technology, financials, healthcare, and materials—sectors with strong earnings revisions and macro support—to seize this rare earnings supercycle amid valuation contraction concerns.

However, Jefferies also flags two core risks: a material slowdown in AI-related earnings growth, which would directly undermine the bull market's foundation, and continued upward pressure on 10-year Treasury yields, which could create systemic pressure on equities through valuation compression.

Wells Fargo rethinks equity map: cuts S&P 500 target

Wells Fargo's chief equity strategist Ohsung Kwon has lowered the S&P 500 year-end target from 7,950 to 7,700, while downgrading the technology sector from "overweight" to "equal weight." The change comes as the upcoming midterm elections become an increasing risk for the sector, especially amid growing opposition to data center development. Kwon is increasingly concerned that years of earnings expansion have pushed market expectations near historic highs, while AI capital expenditure, state-level policy restrictions on data center construction, and fiscal and monetary policy uncertainty continue to escalate.

The strategist does not show significant concern about 2027 earnings but is wary that a slowdown in AI data center-related capital spending could hit 2028 profits. This adjustment is thus more of a reassessment of long-term growth and valuation for the market.

Key movers: Intel, J.B. Hunt, Expedia, energy stocks

Shares of both Intel (INTC) and SK Hynix are trading more than 2.5% higher after reports that the two are in talks for memory chip production in the US for the first time. However, SK Hynix has said no final decision has been made regarding any partnership with Intel.

Transport and logistics firm J.B. Hunt Transport Services saw its stock plunge more than 11% after warning that third-quarter earnings could decline 5%–10% sequentially due to internal adjustments aimed at addressing higher purchased transportation rates.

Morgan Stanley's downgrade of online travel company Expedia Group to underweight has pushed its shares down over 2.5%. The bank's analysts noted an unfavorable risk/reward profile, especially as the company's business is more exposed to weakening consumer spending.

Energy stocks are lower as crude futures fell 2% following a report showing an increase in weekly energy inventories. Shares of Devon Energy (FANG) are down nearly 4%, Occidental Petroleum (OXY) is down 1%, while Exxon Mobil (XOM) and Devon (DVN) are each down close to 1%.

Wolfe Research's upgrade of Paychex to peer perform has lifted the stock more than 1%. Analysts cited a favorable macro environment for revenue growth expectations and noted the company's blue-collar customer base provides resilience against AI-related job displacement.

Union Pacific shares are up 1.5% after UBS initiated coverage with a buy rating. The bank's analysts expect strong volume growth to drive earnings outperformance through 2028.