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.
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.
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.
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.
Which companies are in focus?
- Shares of Moderna Inc. MRNA, -1.91% dropped 1.4%, despite that the company smashed Wall Street’s earnings and revenue expectations for the quarter.
- Lyft Inc. LYFT, -33.94% stock tumbled 27% in premarket trading after the ride-hailing group reported a better-than-expected first quarter, but profit and sales guidance disappointed. Shares of rival Uber Technologies Inc. UBER, -11.40% fell around 6.5%, as the company said it would release its own earnings announcement earlier, ahead of Wednesday’s market open.
- Chinese ride-hailing company Didi Global Inc. DIDI, -5.47%’s American depository receipts plunged 4% in premarket trading, after the company said it was under investigation by the Securities and Exchange Commission regarding its 2021 IPO.
- Herbalife Nutrition Ltd. HLF, -7.83% slid 15% towards a two-year low after the multilevel marketing company announced forecast reductions due to newer “distribitors.
- Airbnb Inc. ABNB, +3.26% shares climbed 4% after the lodging-booking company reported forecast-beating results and said it surpassed 100 million nights booked in a quarter for the first time.
- Match Group Inc. MTCH, -4.87% stock tumbled 6.8% after the online-dating company’s revenue outlook fell short of expectations.
- Starbucks Inc. SBUX, +5.47% stock rose 7% after the coffee giant reported in-line earnings, amid rising costs and inflation and thinner margins. Chief Executive Howard Schultz said “record” demand was helping accelerate store-growth plans.
- Advanced Micro Devices Inc. AMD, +1.84% shares rallied 7% in pre-market trading, after the semiconductor company reported more than $5 billion in quarterly revenue for the first time Tuesday.
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.