U.S. stocks mixed ahead of prospectively biggest Fed rate hike in decades


U.S. stock indexes were mixed in choppy trade Wednesday morning, ahead of the outcome of a two-day Federal Open Market Committee meeting that is expected to deliver the first 50 basis-point interest rate hike since 2000.

Oil prices were also up on news that the EU has proposed a ban on Russian oil.

How are stocks trading?
  • The Dow Jones Industrial Average DJIA, +0.01%  rose 14 points, or 0.1%, to close at 33,144
  • The S&P 500 SPX, -0.39%  lost 17 points, or 0.4%, to 4,159
  • The Nasdaq Composite lost 150 points, or 1.2%, to 12,413

On Tuesday, the Dow industrials DJIA, +0.01% rose 67.29 points, or 0.2%, to close at 33,128.79, the S&P 500  SPX, -0.39% gained 0.5% to finish at 4,175.48. The Nasdaq Composite  COMP, -1.23% added 0.2% to end at 12,563.76.

Read: ‘Bubble stocks popped’ but it’s still not safe to buy them, says Ray Dalio, founder of world’s biggest hedge fund

What’s driving markets?

Alongside a half percentage point interest rate hike, the Federal Reserve is expected to announce the start of “quantitative tightening” when the central bank’s decision is announced at 2 p.m. Eastern Time. Investors will also focus on a news conference with Fed Chairman Jerome Powell at 2:30 p.m. Eastern Time.

Read: Fed on track for biggest rate hike since 2000

Clarity from the Fed on size and scope of future rate increases could give beleaguered stocks a lift, say some analysts.

“With financial conditions tightening ahead of the Fed’s interest rate decision, the Fed could be more dovish,” said the Saxo Bank strategy team, in a note to clients. “Since the Fed’s last meeting, the 10-year yield topped 3% for the first time since 2018, the U.S. dollar rallied 5%, the S&P 500 has fallen 8.74%, and hedge fund exposures fell to a 1.5-year low.”

A slightly more dovish Fed could lead to a short-term rally for hard-hit technology and cyclical stocks, they said. “Keep in mind though, the longer-term picture is still very bearish, medium and longer-term, as the Fed is taking out $1 trillion a year out of the system and the economy is expected to slow,” said Saxo strategists.

The yield on the 10-year Treasury note TMUBMUSD10Y, 2.995% was up 2.8 basis points at 2.999%, while that of the 2-year TMUBMUSD02Y, 2.813% was up 6 basis points to 2.830%.

In U.S. economic data, private payrolls rose by 247,000 in April, according to the ADP National Employment Report released Wednesday. Economists polled by The Wall Street Journal had forecast a gain of 390,000 private sector jobs.

 “In April, the labor market recovery showed signs of slowing as the economy approaches full employment,” said Nela Richardson, chief economist at ADP. 

Meanwhile, U.S. trade deficit jumped 22.3% to record $109.8 billion in March, the U.S. Census Bureau and the U.S. Bureau of Economic Analysis said Wednesday. U.S. imports climbed 10.3% to $351.5 billion, while U.S. exports increased 5.6% to $241.7 billion in March.

In addition, the Institute for Supply Management purchasing managers index for services sector showed weaker new-orders growth and employment, with the number dropping to 57.1% in April from 58.3%, below forecast.

Oil was also in focus, with prices for both Brent BRN00, +3.75% BRNN22, +3.75% and West Texas Intermediate crude CL00, +3.78% CL.1, +3.78% CLM22, +3.78% up over 3.5% each after the European Union proposed banning Russian oil imports under a phased six-month plan, and refined products within a year.

The move would be part of a sixth batch of EU sanctions against Russia over its invasion in Ukraine that began in late February.

Investors will get a fresh batch of corporate earnings on Wednesday also, with results expected from eBay Inc. EBAY, -0.45% and Etsy Inc. ETSY, -1.80%, among others, after the close.

Which companies are in focus?
How did other assets fare?
  • The ICE U.S. Dollar Index  DXY, -0.05%,  a measure of the currency against a basket of six major rivals, was unchanged.
  • Gold futures  GC00, -0.38% slipped, with gold for June delivery  GCM22, -0.38% eased 0.3% to $1,864 an ounce.
  • Bitcoin  BTCUSD, +3.20% was up 1.4% at $38,757
  • In European equities, the Stoxx Europe 600  SXXP, -0.71% fell 0.5%. London’s FTSE 100  UKX, -0.52%  dropped 0.4%.
  • In Asia, the Hang Seng Index  HSI, -1.10% fell 1.1% in Hong Kong, while many other Asian markets remained closed for a holiday.

This article was originally published by Marketwatch.com. Read the original article here.

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