The three major indices of the U.S. New York stock market showed mixed trends near the opening, hovering around flat on the 20th (local time) as they awaited the Federal Open Market Committee (FOMC) results from the Federal Reserve (Fed) to be released. Attention is focused on the dot plot indicating the Fed's future interest rate outlook, the new economic forecast, and Chairman Jerome Powell's press conference.
At around 10:32 a.m. at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, centered on blue-chip stocks, was up 154.18 points (0.45%) from the previous session, standing at 34,671. The S&P 500, dominated by large-cap stocks, was trading 10.15 points (0.23%) higher at 4,454. Meanwhile, the tech-heavy Nasdaq index was down 3.98 points (0.03%) at 13,674.
Currently, nine sectors of the S&P 500 excluding technology and telecommunications stocks are all rising. Instacart, which was listed on Nasdaq the previous day, is showing a decline of nearly 6% compared to the previous session. Klaviyo is making its debut trading today. Dollar General fell more than 2% after JP Morgan downgraded its investment grade due to the impact of high inflation. General Mills showed a slight decline despite quarterly earnings slightly exceeding Wall Street expectations. Pinterest is up more than 3% after projecting accelerated revenue growth starting next year.
Investors are awaiting the FOMC results to be released at 2 p.m. Eastern Time while closely monitoring recent trends in international oil prices and government bond yields. The market expects the Fed to maintain the current interest rate of 5.25-5.5% but deliver a hawkish message through the dot plot and Chairman Powell's press conference. According to the CME FedWatch tool, federal funds futures markets are pricing in more than a 99% probability that the Fed will hold rates steady in September.
Accordingly, investors' attention is focused on the new dot plot, economic outlook, and Chairman Powell's remarks. The Wall Street Journal (WSJ) noted, "With recent economic growth recovering, officials' expectations of a slowdown are being challenged. At the same time, inflation has fallen faster than expected in June," adding, "Officials are likely to anticipate stronger economic growth and lower inflation than in June." The remaining FOMC meetings this year are scheduled for September, November, and December. Key economic data before the November FOMC include the PCE Price Index on September 29, the Nonfarm Payroll report on October 6, the Producer Price Index (PPI) on October 11, and the Consumer Price Index (CPI) on October 12.
Antulio Bomfim of Northern Trust Asset Management said, "Fed officials will emphasize being 'cautious' and will be cautiously optimistic," adding, "I don't think the data is sufficient to meaningfully tilt toward the view that 'it's over now.'" Dylan Cremer, Co-Chief Investment Officer at asset management firm Satuit, said, "What we are watching and what investors are looking for is the long-term expectation, that is, where the terminal rate is."
However, some caution against expecting many hints from the Fed today. George Ball, Chairman of Sanders Morris Harris, said, "The Fed's announcement in the policy statement and press conference will be boringly similar to previous ones," adding, "Inflation is slowing but not enough yet. We will hear what we have heard before." He diagnosed, "The market is volatile and looking for directional signals other than rate hikes or cuts."
Following the Fed, central bank meetings will be held this week in Brazil, Indonesia, Japan, Norway, South Africa, Sweden, Switzerland, Taiwan, and the United Kingdom. The UK’s August CPI inflation rate, released today, fell to its lowest level since February last year, fueling market speculation that the Bank of England (BOE) may end its rate hike cycle sooner than expected. Unlike the Fed, which is widely expected to hold rates steady, the BOE is expected to deliver an additional baby step (a 0.25 percentage point rate hike) on the 21st.
In the New York bond market, government bond yields fell slightly. The benchmark 10-year Treasury yield stood at around 4.32%, while the 2-year yield, sensitive to monetary policy, was at 5.06%. The dollar index, which measures the value of the dollar against six major currencies, traded about 0.3% lower at 104.8. West Texas Intermediate (WTI) crude oil prices traded near $91 per barrel, remaining flat. Goldman Sachs forecast that Brent crude, currently at $94 per barrel, could rise to $100.
European stock markets were up. Germany’s DAX index rose 0.73%, France’s CAC index gained 0.78%, and the UK’s FTSE index increased by 0.99%.
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