Wall Street moves sideways as investors look to Fed
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[September 19, 2023] By
Stephen Culp
NEW YORK (Reuters) - Wall Street closed little changed on Monday as
market participants looked ahead to the U.S. Federal Reserve's expected
decision to leave key interest rates unchanged on Wednesday.
All three major U.S. stock indexes ended a choppy session with nominal
gains, as investors, with few catalysts showed little conviction heading
into the Fed's two-day monetary policy meeting.
"(Fed Chairman Jerome) Powell can spark big moves in either direction
with his comments and you don’t want to get caught on the wrong side of
it," said Peter Tuz, president of Chase Investment Counsel in
Charlottesville, Virginia.
The central bank has vowed to remain agile with respect to economic
data, which has shown signs that core inflation remains on its
meandering descent back toward the Fed's annual 2% target, and suggests
the U.S. economy remains on firm footing.
Against this backdrop, growing jitters that a stalemate on Capitol Hill
could result in a potential government shutdown had market participants
on edge.
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Treasury Secretary Janet Yellen on Monday said that while she sees no
risk of an economic downtown, she warned that a government shutdown
would be "Creating ... a situation that could cause a loss of momentum
is something we don't need as a risk at this point."
The week's main event is the Fed's policy meeting, which is expected to
culminate in a rate hike pause, leaving the Fed funds target rate
unchanged for the second time since March 2022, when the central bank
fired its opening salvo in its battle against inflation.
The Federal Open Markets Committee (FOMC) is also due to release its
quarterly Summary of Economic Projections, which will include the "dot
plot," or a glimpse into participating members' expectations regarding
the future path of interest rates.
Financial markets have currently baked in a 99% certainty that the Fed
will hold the key rate at 5.25%-5.00% on Wednesday. Beyond that, the
trajectory is less certain, with a 69% likelihood of the FOMC holding
firm in November, according to CME's FedWatch tool.
"The market would like to see the dot plot come in lower than last
time," said Sam Stovall, chief investment strategist of CFRA Research in
New York. "It's a case of bad news is good news; most people would say
it would be good if the summary economic projections called for economic
softening next year," as they gauge the timing of a potential Fed pivot.
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Traders work on the floor of the New York Stock Exchange (NYSE) in
New York City, U.S., September 11, 2023. REUTERS/Brendan McDermid
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On the other hand, the possibility that the softening could mutate
into recession remains a top concern.
"Investors are questioning the likelihood of a slowdown versus the
hard landing, wondering if things could get worse than forecasters
are currently projecting," Stovall added.
The Dow Jones Industrial Average rose 6.06 points, or 0.02%, to
34,624.3, the S&P 500 gained 3.21 points, or 0.07%, to 4,453.53 and
the Nasdaq Composite added 1.90 points, or 0.01%, to 13,710.24.
Energy shares, buoyed by rising crude prices gained the most of the
11 major sectors of the S&P 500, while consumer discretionary stocks
suffered the biggest percentage drop, with Tesla Inc weighing
heaviest.
VF Corp slumped 4.6% following Piper Sandler's downgrade of the
apparel company's shares to "neutral" from "overweight."
British chipmaker Arm Holdings slid 4.5% after Bernstein initiated
coverage with an "underperform" rating just days after its stellar
debut.
Paypal Holdings dipped 2.0% after MoffettNathanson cut its rating to
"market perform" from "outperform."
Declining issues outnumbered advancing ones on the NYSE by a
1.22-to-1 ratio; on Nasdaq, a 1.74-to-1 ratio favored decliners.
The S&P 500 posted 6 new 52-week highs and 11 new lows; the Nasdaq
Composite recorded 37 new highs and 247 new lows.
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Volume on U.S. exchanges was 9.44 billion shares, compared with the
10.05 billion average for the full session over the last 20 trading
days.
(Reporting by Stephen Culp; Additional reporting by Ankika Biswas
and Shristi Achar A in Bengaluru; Editing by Aurora Ellis)
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