U.S. Stocks Lack Direction As Fed Meeting Looms
Stocks have shown a lack of direction over the course of morning trading on Monday, with the major averages bouncing back and forth across the unchanged line following the volatility seen to close out the previous week.
Currently, the major averages are narrowly mixed. While the Nasdaq is down 19.85 points or 0.1 percent at 13,688.48, the Dow is up 19.04 points or 0.1 percent at 34,637.28 and the S&P 500 is up 1.84 points or less than a tenth of a percent at 4,452.16.
The choppy trading on Wall Street comes as traders seem reluctant to make significant moves as they look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.
The Fed is widely expected to leave interest rates unchanged, but traders will pay close attention to the accompanying statement and the central bank’s projections for clues about the outlook for rates.
While CME Group’s FedWatch Tool is currently indicating a 99.0 percent chance the Fed will leave rates unchanged this week, the outlook for the November meeting is somewhat more mixed.
The FedWatch Tool is indicating a 68.4 percent chance rates will remain unchanged in November but a 31.3 percent chance of another quarter point rate hike.
“How the Fed delivers the pause is crucial for November and December rate expectations, but whether it’s presented with a dovish or hawkish tilt is what matters most for financial markets,” said Quincy Krosby, Chief Global Strategist for LPL Financial. “The Fed, and Fed Chair Powell particularly, will emphasize that they remain data dependent.”
She added, “Financial markets are even more keenly data dependent, and the wrapping of the pause, with a dovish or hawkish angle, is key for the market’s direction.”
On the U.S. economic front, the National Association of Home Builders released a report showing homebuilder confidence in the U.S. has unexpectedly deteriorated in the month of September.
The report said the NAHB/Wells Fargo Housing Market Index slumped to 45 in September after tumbling to 50 in August. Economists had expected the index to come in unchanged.
The housing market index dropped below the key breakeven measure of 50 for the first time in five months, as persistently high mortgage rates above 7 percent continue to erode builder confidence.
Sector News
Reflecting the lackluster performance by the broader markets, most of the major sectors are showing only modest moves on the day.
Biotechnology stocks are seeing notable weakness, however, with the NYSE Arca Biotechnology Index falling by 1.3 percent to its lowest intraday level in well over five months.
Computer hardware and airline stocks have also moved to the downside on the day, while energy stocks are moving higher along with the price of crude oil.
With crude for October delivery jumping $1.09 to $91.86 a barrel, the Philadelphia Oil Service Index and the NYSE Arca Oil Index are both up by 1.2 percent.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Monday, with the Japanese markets closed for a holiday. Hong Kong’s Hang Seng Index tumbled by 1.4 percent and South Korea’s Kospi slumped by 1.0 percent, while China’s Shanghai Composite Index bucked the downtrend and rose by 0.3 percent.
The major European markets have also moved to the downside on the day. While the French CAC 40 Index is down by 1.4 percent, the German DAX Index is down by 1.0 percent and the U.K.’s FTSE 100 Index is down by 0.6 percent.
In the bond market, treasuries have regained ground after seeing early weakness but remain in the red. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up 1.1 basis points at 4.333 percent.
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