Market Snapshot: Dow struggles to hold slight gains, Nasdaq slumps, ahead of Fed policy update

What’s driving the markets?

Stocks have seen a tough start to the week as investors brace for the outcome of the Federal Reserve meeting, due at 2 p.m. Eastern Time, with a news conference to follow at 2:30 p.m. by Fed Chairman Jerome Powell.

The central bank is expected to announce a faster reduction in the pace of its bond buying to combat rising inflation, and with that faster taper will come expectations of higher interest rates. The latter has put particular pressure on growth-focused technology stocks, which are more sensitive to interest rate changes.

Read: 5 things to watch for when the Federal Reserve announces its policy decision Wednesday

“The way we are looking at today’s meeting is what else can the market take as incrementally more hawkish?” said Jack Janasiewicz, portfolio manager at Natixis Investment Managers Solutions, in a phone interview.

“The market, at this point, is certainly expecting Powell to increase tapering,” he said, but traders also have been pricing in a pace of rate hikes that would put policy rates close to 1.5% by the end of 2023.

Investors also are on the lookout for any Fed comments on the effect of the fast-spreading omicron variant on the U.S. economy. The death toll in the U.S. has surpassed 800,000 from COVID-19, and a study from the Centers for Disease Control and Prevention reportedly warned of a surge in cases, peaking in mid-January that could overwhelm communities that haven’t seen denizens fully vaccinated.

Ahead of the Fed meeting, data showed U.S. November retail sales rising just 0.3%, well short of the 0.8% rise expected by economics polled by The Wall Street Journal. The Empire State manufacturing index for New York showed a better-than-forecast reading of 31.9 in December.

The National Association of Home Builders index increased in December for a fourth month in a row to 84 from 83 a month ago, with more builders viewing conditions as favorable than poor. Government data also showed business inventories for October rose 1.2%, even as companies struggle to restock fast enough to offset brisk sales.

See also: It’s Fed day. Here are two big questions for markets from a trading veteran.

What companies are in focus?

• Shares of Amazon.com Inc. were 2% lower after its cloud-service network, Amazon Web Services, on Wednesday said it was suffering a fresh outage, about a week after the service was down for hours last Tuesday, disrupting access to many popular sites. 

• Shares of home-improvement retailer Lowe’s Cos.
  LOW,
  +1.26%
  rose 1.4% after its 2022 guidance fell short of forecasts.

• Eli Lilly stock
  LLY,
  +9.52%
  rose 9.5% after the pharmaceutical group lifted guidance with an update on its drug pipeline.

How are other assets trading?

• The yield on the 10-year Treasury note 
  TMUBMUSD10Y,
  1.444%
   was steady at 1.448%. Treasury yields and prices move in opposite directions.

• The ICE U.S. Dollar Index
  DXY,
  +0.00%,
  a measure of the currency against a half-dozen other monetary units, was flat.

• In oil futures, West Texas Intermediate crude 
  CL00,
  -0.41%
   for January
  CLF23,
  -1.06%
  delivery declined 0.5% to $70.35 a barrel.

• Gold futures 
  GC00,
  -0.30%
  for February delivery 
  GCG22,
  -0.30%
   fell 0.3% to $1,766 an ounce.

• The Stoxx Europe 600 Index 
  SXXP,
  +0.26%
  closed 0.3% higher, while London’s FTSE 100 Index
  UKX,
  -0.66%
  lost 0.7%.

• In Asia, the Shanghai Composite Index 
  SHCOMP,
  -0.38%
  fell 0.4%, while the Hang Seng Index 
  HSI,
  -0.91%
  fell 0.9% in Hong Kong. China’s CSI 300
  000300,
  -0.87%
  dropped 0.8%. Japan’s Nikkei 225 Index 
  NIK,
  +0.10%
  was flat.

—Barbara Kollmeyer contributed reporting