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U.S. stocks traded fractionally higher Wednesday as investors turned their attention to a Federal Reserve policy update later in the session that will offer insights on the path of future interest rates, while continuing to monitor progress on China-U.S. trade talks.
How are benchmarks performing?
Futures for the Dow Jones Industrial Average YMZ19, -0.09% fell 29 points, or 0.1%, at 27,892, those for the S&P 500 index ESZ19, +0.14% were up nearly 4 points at 3,140, while Nasdaq-100 futures NQZ19, +0.25% edged up 19 points, or 0.2%, at 8,3783.
On Tuesday, the Dow DJIA, -0.10% shed 27.88 points, or 0.1%, at 27,881.7, while the S&P 500 index SPX, -0.11% gave up 3.44 points, or 0.1%, at 3,132.52, while the Nasdaq Composite Index COMP, -0.07% lost 5.64 points, or less than 0.1%, at 8,616.18.
On Monday, the Dow retreated 105.46 points, or 0.4%, at 27,909.60, while the S&P 500 index lost 9.95 points, or 0.3%, at 3,135.96 and the Nasdaq Composite Index shed 34.70 points, or 0.4%, at 8,621.83.
All three benchmarks ended Tuesday within 1% or less of their record closes set nearly two weeks ago on Nov. 27, according to Dow Jones Market Data.
What’s driving the market?
With no clarity on a partial U.S. – China trade pact ahead of a Sunday deadline that will see tariffs on mostly consumer products increased to 15% on some $160 billion in China imports, investors are pivoting to the outlook for the economy and monetary policy that the Fed will deliver later Wednesday.
Strategists aren’t expecting significant changes from the Fed, but they are looking for signs of how the central bank assesses the state of the domestic economy against the backdrop of slowing global growth and uncertainty wrought by President Trump’s trade war.
Last Friday’s strong jobs report, which showed that the U.S. economy created 266,000 jobs in November, is expected to provide further reason for the Fed to stand pat on interest rates, with the policy rate currently at a 1.75%-2% range, after three reductions this year.
Market participants will likely look for affirmation that the Fed will hold levels steady and indicate that they don’t intend to lift rates soon. A reading from the so-called dot plots, a chart of policymakers’ outlook for future rates in coming years, will be closely parsed.
Read: Three things market participants should watch for at the Fed interest-rate meeting
“A simple signal from the Fed that it intends to lay low should be enough to support risk sentiment. The biggest risk probably comes from an accidental signal to change policy from the dot plot,” wrote Jasper Lawler, head of research at London Capital Group, in a Wednesday research report.
An update from the Fed’s two-day gathering will come at 2 p.m. Eastern Time, with a news conference with Chairman Jerome Powell slated for a half-hour later.
In U.S. economic data, inflation was slighter hotter than expected in November, the government said Wednesday. The consumer price index was up 0.3%, higher than the consensus of 0.2%, and was up 2.1% compared to a year ago, the highest reading since last November, but not seen likely to change the Fed’s thinking.
Meanwhile, the market is hoping for a delay on an increase in Dec. 15 tariffs on China goods as a sign of progress on trade talks. So far, reports have been conflicting.
White House advisers Larry Kudlow and Peter Navarro have both indicated that tariffs scheduled to hit Chinese goods on Dec. 15 are “still on the table,” following a report from the Wall Street Journal that said both parties were bracing for a delay of a tariff increases on China goods on Sunday, which would be read as an escalation of tensions.
See: The runway until more China tariffs kick in is getting short. Expect a bumpy ride
In addition to trade policy and the Fed meeting, investors are keeping an eye on Britain, which is on the eve of a general election that could help to determine the future of its efforts to leave the European Union. Prime Minister Boris Johnson’s Conservative Party leads in polling for the U.K.’s general election set for Thursday, but his lead has been narrowing.
Meanwhile, shares of state-backed Saudi Aramco gained 10% on its first day of trading in Riyadh, making it the world’s largest initial public offering and the most highly-valued company in the world.
Which stocks are in focus?
American Eagle Outfitters AEO, -1.43% shares sank 8.4% in Wednesday premarket trading after the retailer gave weak fourth-quarter guidance.
Home Depot HD, -0.29% , ahead of its investor day, set its targets for fiscal 2020, saying it expects sales growth between 3.5% and 4%, comparable sales growth between 3.5% and 4%, an operating margin of 14% and a return on invested capital of 45%.
Shares of United Natural Foods Inc. UNFI, +1.86% sagged in pre-market trading after the grocery distributor reported a $7.21 per share loss, up from 38 cents a year ago.
Children’s Place Inc. PLCE, +1.09% shares fell in pre-market trading after reporting earnings. Adjusted earnings beat consensus expectations, but the retailer said it expects sales to decline about 3%.
Shares of Autozone Inc. AZO, +6.93% were higher Wednesday morning before the market opened after a series of upgrades and price target increases from analysts.
Related: Don’t get so excited, this economist says — the trade news isn’t that good
How are other markets faring?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -0.89% edged down 1 basis point to 1.83% Wednesday ahead of the Fed and the CPI report.
West Texas Intermediate crude CLF22, +1.19% on the New York Mercantile Exchange lost 22 cents, or 0.4%, to $59.02 a barrel.
February gold GCG20, +0.25% on Comex added $3.10, or 0.2%, to $1,471.20 an ounce, after a similar gain on Tuesday.
The U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, +0.05%, rose a slight 0.1% to 97.50, against a basket of a half-dozen currency peers.
In Asia overnight Friday, the Hang Seng HSI, +0.79% closed 0.8% higher, the China CSI 300 000300, +0.06% inched up 0.1%, following similar move a day ago, while the Shanghai Composite Index SHCOMP, +0.24% gained about 0.2%. Japan’s Nikkei 225 NIK, -0.08% shed less than 0.1%.
In Europe, the Stoxx 600 Europe index SXXP, +0.09% headed less than 0.1% lower at 405.30.
See: Get ready for a jolly holiday season, and maybe a stock-market rally, Ned Davis Research says
