LIVE MARKETS-US stocks retreat further ahead of Fed; what people expect to hear

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US STOCKS RETREAT FURTHER AHEAD OF FED; WHAT PEOPLE EXPECT TO HEAR

Market watchers are anxious to hear from the Federal Reserve this afternoon given worries about high inflation and uncertainty surrounding the views of U.S. central bank chief Kevin Warsh, who just took over in May. U.S. stocks are sharply lower in midday trading Wednesday and major indexes have added to losses since the opening bell. The Dow .DJI and Nasdaq .IXIC are both down more than 1%.

Here is what some market watchers are saying ahead of the Federal Reserve's 2 p.m. EDT (1800 GMT) rate decision and comments from the Fed chair:

Tom Lee, managing partner and the head of research at Fundstrat Global Advisors, writes that Fundstrat would be surprised if the Fed hikes rates this afternoon. But, he says, "there is a possibility the Fed might again resume QT," referring to quantitative tightening, a central bank policy that reduces money supply.

Paul Stanley, managing director and founding advisor for Arca in New York, writes: "While we don't expect the Fed to hike interest rates on Wednesday, we expect to hear a continuation of the Fed's direct and unambiguous stance that it will not tolerate high inflation." And he notes that "investors will still be trying to get accustomed to his tone and style. It can take a few meetings for markets to become comfortable with a new Federal Reserve Chair."

Yardeni Research says the market expects "the Fed's monetary policy committee to leave the federal funds rate (FFR) unchanged at 3.50%-3.75%..." The firm says recent data continues to suggest that inflation risks outweigh labor market risks. In addition to the statement and comments from Warsh, investors will be closely watching "the degree of any dissent for clues about the policy outlook."

Wells Fargo Investment Institute says its base case remains that the Fed does not raise interest rates in 2026. Co-Head of Global Fixed Income Strategy Brian Rehling notes: "The Fed is signaling that it is not ready to declare victory and may keep policy tight if inflation remains stubborn."

(Caroline Valetkevitch)

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