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U.S. equity futures edged lower Tuesday, while the dollar extended gains against its global peers and Treasury yields steadied, as investors looked to the start of the Federal Reserve’s two-day policy meeting while eyeing moves in AI-related stocks following Nvidia’s flagship developers conference in San Jose.

Stocks ended higher on Monday, powered yet again by gains for the so-called Magnificent 7. Nvidia  (NVDA)  unveiled its next-generation AI processor and reports suggested Apple  (AAPL)  was looking to embed Alphabet’s  (GOOG)  Gemini technology into its iPhones and computers.

Nvidia’s big unveiling, however, may fail to hoist rival chipmakers in early Tuesday trading as the market’s hottest stock shied away from offering pricing details on its new Blackwell B200 chip. But Nvidia nonetheless solidified its dominance in the artificial-intelligence market.

Nvidia shares were marked 0.9% lower in premarket trading to indicate an opening bell price of $876.52 each, while Advanced Micro Devices  (AMD)  fell 2.4% and Broadcom  (AVGO)  slipped 1%.

Investor focus is now likely to shift to the start of the Fed’s two-day policy meeting in Washington, with eyes on the new Summary of Economic Projections, or dot plots, from Fed officials. That report will be released tomorrow at 2:00 p.m. U.S. Eastern Time. 

Any change in the Fed’s current forecast of around three rate cuts this year, linked to stubbornly high inflation and a resilient domestic economy, will have a big impact on Treasury bond yields as well as the broader market. 

“Hawkish commentary from Fed Chair Powell in prior meetings, coupled with a string of hotter-than-expected inflation reports, have pushed expectations for the elusive initial rate cut to the summer,” said Jason Pride, chief of investment strategy at Glenmede. 

“In addition, the latest update to the dot plot will be closely parsed, particularly if there are any changes to the median respondent’s expectations for 2024 rate cuts.”

At present, investors put the odds of a Fed interest-rate cut in June at around 55%, down sharply from around 70% in the first week of February. 

Fixed-income investors will also be on high alert following the Bank of Japan’s decision to raise interest rates for the first time in 17 years last night. The central bank also ended its eight-year era of negative rates and loosened its grip on the Japanese government bond market.

The higher yields that are likely to follow could pressure U.S. Treasury bonds as Japanese investment funds repatriate their foreign investments in favor of better domestic returns.

Benchmark 10-year Treasury note yields were holding steady at 4.322% in early New York trading following the Bank of Japan decision, while 2-year notes were pegged at 4.719%.

The U.S. dollar index, which tracks the greenback against a basket of six global currency peers, was marked 0.54% higher at 103.989 as the yen drifted to 150.53 following the historic BoJ decision.

On Wall Street, stocks are set for a modestly weaker open following last night’s rally, with futures contracts tied to the S&P 500 indicating a 5-point opening bell decline.

Futures linked to the Dow Jones Industrial Average are indicating a 25-point pullback while those tied to the tech-focused Nasdaq are suggesting a 30-point decline.

In Europe, the regionwide Stoxx 600 was little changed in early Frankfurt trading despite a benchmark survey showing German investor morale improved notably this month on the back of anticipated European Central Bank rate cuts. 

Overnight in Asia, Japan’s Nikkei 225 ended 0.66% higher following the Bank of Japan’s major policy moves, while the regionwide MSCI ex-Japan index was marked 1.01% lower heading into the close of trading. 

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