Stocks set to retreat after rally

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NEW YORK (CNNMoney) -- U.S. stocks were set to fall Wednesday, following the previous session's huge rally in the aftermath of the Federal Reserve's pledge to keep interest rates exceptionally low through the middle of 2013.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were down about 1% ahead of the opening bell. Stock futures indicate the possible direction of the markets when they open at 9:30 a.m. ET.

Stocks finished Tuesday's volatile session with huge gains after the Fed left key interest rates unchanged, saying that deterioration in the labor market and slower-than-expected economic growth will require the central bank to keep interest rates "exceptionally low" until the middle of 2013.

The rally managed to erase a big chunk of the prior session's steep losses, but stocks have been on a wild ride during the last couple of weeks, and are down nearly 13% in the last month.

Peter Cardillo, chief market economist at Rockwell Global Capital, expects stocks will continue to claw back from the recent losses, though volatility will remain high.

"We'll probably see huge moves in both directions, but I think we'll log some gains toward the end of the session, with some of Tuesday's upward momentum," he said.

Economy: The government releases its report on June wholesale inventories, which are expected to have risen 1%.

Companies: London-based HSBC Holdings sold its U.S. credit card arm to Capital One (COF, Fortune 500) for $2.6 billion. Shares of HSBC (HBC) slipped 0.7% in premarket trading, while Capital One's stock jumped almost 3%.

Dow member and communications equipment maker Cisco Systems (CSCO, Fortune 500) reports its quarterly results after the closing bell. Analysts are looking for it to report a profit of 38 cents a share, according to Thomson Reuters.

Media giant News Corp. (NWSA, Fortune 500), which has recently been in the news due to its alleged part in the U.K.'s phone hacking scandal, also reports after the closing bell.

World markets: European stocks were higher in afternoon trading. Britain's FTSE (FTSE) 100 rose 0.5%, the DAX (DAX) in Germany climbed 1.1% and France's CAC (CAC) 40 edged up 0.1%.

Asian markets ended the day with solid gains. The Shanghai Composite gained 0.9%, the Hang Seng in Hong Kong popped 2.3% and Japan's Nikkei increased 1.1%.

Currencies and commodities: The dollar gained slightly against the euro and the British pound, but was lower versus the Japanese yen.

The greenback also rose against the Swiss franc, after the Swiss National Bank announced additional measures to curb the franc's rise. The central bank also attempted to weaken its currency last week.

Oil for September delivery rose $2.98 to $82.28 a barrel.

Gold futures for December delivery gained $23.00 to $1,766 an ounce. Earlier, gold futures hit an intraday high of $1,770 per ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 2.23% from 2.18% late Tuesday.