January 27, 2023

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Stocks push higher as Fed rate decision looms

Stocks push higher as Fed rate decision looms

US stocks posted modest gains at the open on Wednesday as investors grapple with the Federal Reserve’s seventh and final interest rate hike of 2022.

The central bank is It is expected to rise by half a percentage point At the conclusion of the two-day policy meeting at 2 p.m. ET. The increase is set to bring the key federal funds rate to a new range from 4.25% to 4.5%, the highest level since December 2007.

S&P 500 Index (^ The Salafist Group for Preaching and Combat) and the Dow Jones Industrial Average (^ DJI) each increased 0.2%. technology-focused Nasdaq Composite (^ ix) rose by about 0.1%. In other markets, US Treasury bonds retreated after rising on Wednesday, and the US dollar index fell. West Texas Intermediate (WTI) crude futures rose 1% to trade above $76 a barrel.

Investors will evaluate notes from Federal Reserve Chairman Jerome Powell at 2:30 PM ET in the wake of the rate announcement. Economic outlooks from policymakers and the latest dot chart showing each member’s expectations for the US short-term interest rate will also serve as guides for investors about the Fed’s path forward.

The decision will follow the closely watched November Consumer Price Index (CPI) on Wednesday, which increased at an annual rate of 7.1% Clip last month, the second consecutive bearish surprise in inflation data. Stores Closed higher after the reportBut Wall Street’s reaction has been underwhelming, as there remains uncertainty about how much additional pricing should go to suppress still-rising prices.

While a downward turn in inflation was welcome on Wednesday, stock markets pared much of the gains that came immediately after the print as traders thought, “Now what?”

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“The Fed continues to focus on labor market imbalances, and there is still a long way to go for pessimistic pivots,” Ma added. . “This is all a balancing act, and we believe it points to volatile markets in the near term although the improving inflationary backdrop adds a positive bias.”

WASHINGTON, DC – NOVEMBER 30: US Federal Reserve Chairman Jerome Powell speaks at the Brookings Institution, November 30, 2022 in Washington, DC. Powell discussed the economic outlook, inflation and the labor market. (Photo by Drew Angerer/Getty Images)

This opinion was Other Wall Street strategists echoed itincluding Bank of America chief US economist Michael Jabin, who noted that although the November consumer price report reflects a faster rebound in commodity inflation than expected, service inflation remains flat.

“This is unlikely to affect the Fed’s decision in December – we still expect them to hike 50 basis points – however, it could spark discussions about another drop in February,” Jabin said in a note penned with his team at Bank of America. “We still think it’s over 50 basis points given the tightness in the labor market and the high wage growth, but the debate should be more lively especially if we get another weak inflation report for December.”

This week marks what might be The last week of major US economic events year for investors, with the government’s retail sales report also on the agenda for Thursday. While the busy economic calendar keeps traders busy domestically, traders will be watching the moves of central banks abroad, as policymakers from the British Bank of England, Mexico, Norway, the Philippines, Switzerland and Taiwan prepare to carry out their own actions. Rate decisions on Thursday.

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United kingdom He received his inflation reading Tuesday: The rapid rise in consumer prices slowed slightly to 10.7% from a year earlier in November, down from a 41-year high of 11.1% during the previous month. British stocks fell as investors await the US Federal Reserve’s messages later in the day and the Bank of England’s interest rate decision on Thursday. The pound traded near its highest level since June.

Back on this side of the Atlantic, all eyes were also on the latest developments in the cryptocurrency world, with former CEO of collapsing cryptocurrency exchange FTX Sam Bankman-Fried He faces a wave of criminal charges For dealing with the assets of customers and investors.

On the corporate front, earnings from companies including Lennar (flexible), Trip.com (TCOM) and Weber (WEBR) Wednesday.

Alexandra Semenova is a correspondent at Yahoo Finance. Follow her on Twitter @employee

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