Market Analytics and Considerations
Key Notes
As investors avoided making large wagers ahead of the Federal Reserve’s announcement on interest rates later in the day, the major stock indexes on Wall Street edged up slightly on Wednesday.
The fed funds rate will likely increase by 0.5 percentage points to 4.25–4.50% from the US central bank. At 2:00 p.m. ET (1800 GMT), the announcement will be made public. Chair Jerome Powell will then hold a press conference.
Following data that showed U.S. consumer prices climbed at their weakest pace in roughly a year in November, worries over the Fed sticking to its course on rate hikes had subdued an early Tuesday gain on Wall Street.
For a while, the stock market will favor decreasing inflation. The inflation rate continues to hover in the sevens, and while I believe it is possible to decrease it to four without the need for a rise in unemployment, it will be extremely challenging to return to the targeted rate.
The markets are aware that ahead indications like the yield curve are signaling a caution that the economy may face more difficult times in the future and that we may also be setting ourselves up for earnings troubles.
The top fed-funds rate will remain at 4.625% after the central bank raises rates by yet another 25 basis points at its summit in February, according to Morgan Stanley strategists.
In contrast, traders in the money market anticipate two additional increases of 25 basis points in 2019 that will raise the endpoint rate to 4.82% by May.
Risk assets like equities have been severely hit by concerns that aggressive interest rate increases by major central banks could send the global economy into a recession.
The S&P 500 and Nasdaq are on pace to record their poorest yearly outcomes since the financial crisis in 2008 with losses of 15.3% and 27.9%, correspondingly, for the year.
Due to the Fed’s swift rate rises, the rate-sensitive S&P 500 real estate sector index and productivity index have experienced double-digit declines in 2022.
The S&P 500 was higher 14.07 points, or 0.35%, by 4,033.72 at 9:53 a.m. ET, while the Nasdaq Composite was higher 20.00 points, or 0.18%, at 11,276.82. The Dow Jones Industrial Average was higher 137.28 points, and 0.40%, at 34,245.92.
The gains ranged from 0.9% to 1.1% for megacap growth firms like Microsoft Corp (NASDAQ: MSFT), Apple Inc (NASDAQ:AAPL), Mastercard Inc (NYSE:MA), and Qualcomm (NASDAQ:QCOM).
On the NYSE and the Nasdaq, advancing issues outpaced declining ones by a ratio of 1.35 to 1 and 1.12 to 1, respectively.
The Nasdaq posted 23 new highs and 83 new depths/lows, compared to the S&P index’s 3 new 52-week tops and none new depths.
