Noreen Burkhart

Investing.com — As it struggles with high inflation and leaves aside worries about market volatility, the Federal Reserve will likely lay the foundation for a March rate increase. U.S. stocks are trying to rebound with support from a positive sales forecast by Microsoft (NASDAQ.). Companies reporting quarterly earnings include Intel (NASDAQ), Boeing (NYSE), and Tesla (NASDAQ). Petroleum prices have been influenced by geopolitical tensions ahead of U.S. inventory statistics. In addition, the Bank of Canada has begun considering raising rates for its first time since 2018. Here’s what you need to know in financial markets on Wednesday, 26th January.

1. Fed Day

The Fed isn’t expected to announce any policy changes at the conclusion of its two-day meeting later Wednesday but is expected to indicate that rate hikes will begin in March.

U.S. inflation is at an all-time high of nearly four decades, and the unemployment rate has fallen to 3.9%. Fed Chair Jerome Powell has a communication issue with markets that are used to tighter monetary policies.

Investors will be looking for clues on the timeline and pace of rate hikes and the central bank’s plans for trimming its almost $9 trillion balance sheet, another way of tightening monetary policy.

Powell will need to strike a balance in communicating the Fed’s intentions to keep the economic recovery on track while simultaneously taking measures to curb high inflation.

The of the Fed’s policy decision will come at 2 PM EST (1900 GMT) and will be followed half an hour later by a with Powell.

2. Stocks to rebound

The U.S. stock exchanges are expected to rebound from Tuesday’s volatile session that saw all three major indexes finish lower but higher than the lows of the day.

They were at 0.9% by 6:25 AM ET. They increased 1.3% to 1.8%

On Tuesday, the market closed 9.2% lower than its record-setting high of Jan. 3, due to a wide-based selloff that was triggered by worries about a Fed with a more hawkish tone and increased geopolitical tensions.

After the revenue forecast for the second quarter was exceeded, markets were buoyed. The stock initially fell in after-hours trade, before surging higher (NASDAQ:) after the company also forecast revenue for the current quarter that exceeded forecasts, boosted by solid demand for cloud computing.

The report boosted the outlook for upcoming results from competitors Amazon (NASDAQ:) and Alphabet’s Google (NASDAQ:).

3. Tesla, Boeing and Intel will report

The corporate earnings roster features results from companies including Boeing, AT&T (NYSE:), Abbott Labs (NYSE:), Nasdaq (NASDAQ:), Kimberly Clark (NYSE:), and Whirlpool, (NYSE:), ahead of the opening. Tesla and Intel report after the close.

Tesla’s fourth-quarter is seen at a record $16.88 billion with profit per share coming in at $2.25, according to analysts tracked by Investing.com. Analysts will be listening to what Elon Musk’s company says about the outlook for production, as well as competition from newer EV companies and old-guard auto makers such as General Motors Company (NYSE:) and Ford Motor Company (NYSE:).

Intel will provide insight into the supply chain as well as chip production. Analysts will look to Intel for information.

4. Petroleum oil prices rise due to geopolitical tensions and inventory data being analyzed

As investors eagerly awaited the Fed meeting, and U.S. inventory information later that day, oil prices rose.

Futures rose 0.7% to $86.16 per barrel at 6:25 AM ET after rising 2.8% Tuesday.

Futures rose 0.7% to $87.83 per barrel, after rising 2.2% during the previous session.

Tensions over Ukraine between Russia and the U.S. remained at the forefront. Russia insists it doesn’t intend to invade Ukraine. However, the West threatened serious sanctions in case that this happens.

The overnight stockpile data from the revealed that U.S. crude oil and distillate inventories declined in the week ending Jan. 21, while gasoline inventories increased.

Energy traders look forward to the Energy Information Administration’s weekly U.S. report (EIA), due out at 10.30 AM ET (1530 GMT)

5. Bank of Canada rates hike

Not only is the Fed the central bank that is announcing today’s policy decisions, but also is Canada’s Bank of Canada meeting. It may announce its first rate increase since 2018.

Canadian inflation stands at 4.8%, a 30 year high. But officials from BoC need to account for the Omicron variation’s economic impact when considering whether to start a tightening cycle.

This announcement will take place at 10 AM Eastern Standard Time (1500 GMT).

By 06.25 AM ET, the dollar was around 0.5% higher than it had been at the beginning of this morning.

–Reuters and Investing.com staff contributed to this report.