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U.S. stocks were up modestly Wednesday morning, with the Dow Jones Industrial Average rising more than 100 points, as investors await a monetary policy update from the Federal Reserve.
How stocks are trading
-
The Dow
DJIA,
+0.40%
was up nearly 135 points, or 0.4%, at about 34,244. -
The S&P 500
SPX,
+0.52%
rose almost 20 points, or 0.5%, to 4,039. -
The Nasdaq Composite
COMP,
+0.53%
gained almost 56 points, or 0.5%, to about 11,313.
On Tuesday, the Dow ended with a gain of slightly more than 100 points, or 0.3%, after initially jumping more than 700 points early in the session. The S&P 500 rose 0.7%. and the Nasdaq Composite gained 1%.
The Dow continues to outperform for 2022 as the year draws to a close. It is down just 6.1%, compared with the S&P 500’s fall of 15.7% and the Nasdaq Composite’s 28.05% decline.
What’s driving markets
U.S. stocks were showing modest gains Wednesday morning as Wall Street prepared for the Federal Reserve’s policy decision expected in the afternoon.
The U.S. central bank is expected to raise borrowing costs by 50 basis points to a range of 4.25% to 4.50% at 2 p.m. Eastern time.
Market participants also expect the Fed’s so-called “dot plot” to show projections for its 2023 terminal rate rising to 4.875%, up 25 basis points from September, according to a note Wednesday morning from Tom Essaye, the founder and president Sevens Report Research. He said that a terminal rate of 5% or above would be viewed as “hawkish,” and probably weigh on stocks.
The Fed’s previous 375 basis points of interest rate hikes since March, as it battled to suppress multidecade high inflation, have left the S&P 500 down nearly 16% for the year.
However, equity investors have become more hopeful that signs of easing inflation, including a softer-than-expected reading from the consumer-price index on Tuesday, may allow the Fed to be less aggressive in its tightening monetary policy and potentially make a recession less likely.
See: Fed seen slowing down to quarter-point hike in February after soft consumer price inflation reading
This narrative has helped the S&P 500 rally 12.4% off its 2022 lows hit in mid-October. But some analysts remain wary that such optimism may wane if faced with a resolutely hawkish Fed, a view that may explain why equities gave up a big chunk of Tuesday’s initial bounce.
MarketWatch Live: Stock-market internals ‘no better off today than yesterday’: RenMac’s deGraaf
“The softer-than-expected inflation print in the U.S. sent the stocks higher and the U.S. dollar lower, but the S&P 500 couldn’t clear key resistance levels, as investors know that the Federal Reserve (Fed) Chair Jerome Powell could coldheartedly kill the market joy at his post-FOMC press conference today,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The consumer-price index showed that inflation rose 0.1% in November for a year-over-year rate of 7.1%. That’s down from 7.7% the prior month, with the year-over-year rate falling from 9.1% in June.
Powell’s news conference is due to begin at 2:30 p.m. Eastern time.
The Fed may slow its pace of rate hikes in 2023, but the central bank is “still several months away from pausing, and even further from a pivot,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, in a note dated Dec. 13. “And given stocks don’t typically see a turning point until rate cuts are on the horizon, we still don’t believe a sustained rally is likely over the next three to six months.”
