The New York Stock Exchange is set to open slightly lower on Tuesday morning, on the first day of the Federal Reserve's monetary policy meeting, which concludes tomorrow.

Half an hour before the opening, futures contracts on the main New York indices were down 0.2%, heralding a rather cautious start to the session.

Risk-taking is likely to remain limited, as the Fed's Federal Open Market Committee (FOMC) is due to begin two days of discussions in a few hours' time, which are expected to culminate in a 'status quo' on Wednesday.

While the Fed is not expected to change its rates, investors will be closely watching statements by Fed Chairman Jerome Powell, on the lookout for any hint of future interest rate cuts.

Despite the good news on core PCE inflation, we don't expect this meeting to be too 'dovish'," warns Tiffany Wilding, economist at PIMCO.

"We believe that Chairman Powell will refrain from signaling a rate cut in March," she adds, favoring the idea that a first rate cut will come closer to the middle of the year.

The session ahead is therefore likely to be marked by narrow spreads, especially as the releases of heavyweights Microsoft, Alphabet and AMD will be particularly closely scrutinized this evening, after the market close, as investors question the already stretched valuations of technology stocks.

The Nasdaq 100 index, which has already risen by 4.5% since January 1, is currently trading on a PER of 31.4x, compared with 26.4x a year ago.

Given that Microsoft, Apple, Alphabet, Amazon and Meta account for over 24% of the total weighting of the S&P 500 index, any unpleasant surprises could have a major impact on the index and mark the end of the rally.

In earnings news this morning, Pfizer reported adjusted net income more than halved to $593 million for the final quarter of 2023, due to declining sales of its Comirnaty vaccine and its Paxlovid treatment for Covid-19.

GM reported fourth-quarter adjusted EPS down 41.5% to $1.24 and an adjusted EBIT margin down 4.7 points to 4.1%, on stable revenues (-0.3%) of just under $43 billion.

On Tuesday, UPS reported a slightly better-than-expected quarterly profit, but also lower-than-expected sales, a counter-performance that was punished by a drop of more than 4% in its share price in after-hours trading.

Against this cautious backdrop on the eve of the Fed's announcements, investors are returning to the most defensive assets, such as Treasuries, pushing the yield on 10-year Treasuries down to 4.07%.

Gold is also continuing its rally, enabling the yellow metal to return towards its all-time highs at $2056 an ounce, a gain of 0.6%.

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