Before The Bell
In the early part of yesterday’s trading session, stocks were buoyed by stronger-than-expected housing starts and building permits data for August. Too, the early session rebound was likely some bargain hunting for stocks that had been pummeled during Monday’s session. However, these positives were hurt by continued selling throughout much of the trading day. Growing concerns about inflation, the U.S. Federal Reserve’s upcoming monetary policy decision (at 2:00 P.M. (EDT) today), and a potential slowdown in China’s economy caused the markets to fall to near session lows by the close. Overall, the S&P 500 declined four points, and the Dow Jones Industrial Average was down 51 points. However, the NASDAQ eked out a gain of 33 points during the session. Meantime, the futures market, which moved lower yesterday evening after stock prices were mixed during the trading session, is now decidedly in the green this morning, suggesting a strong start to the trading day.
All eyes today will be on the Federal Reserve, as the central bank releases its interest rate policy and projections this afternoon. Though traders expect interest rates to be held steady, most investors think that Chairman Powell will make a statement concerning the tapering of its bond-buying program; the consensus expectation is that the central bank will at least hold off until its November FOMC meeting to begin the reduction of asset purchases. The Fed has been purchasing around $120 billion monthly, which has provided liquidity to the markets. A reduction would signal that the Fed is willing to tighten monetary supply some over the coming quarters. Additionally, traders will be looking at the economic projections to see if they can gain insight into the Fed’s thinking on interest-rate policy.
Despite the uneven indices performance yesterday, market breadth was slightly positive, as advancers outpaced decliners by a 1.2-to-1.0 ratio. Energy sector stocks were the best performers, despite some volatility in the related commodities. Meantime, the industrials sector issues were among the weakest performers.
In commodity news, oil prices traded unevenly throughout the day and wound up slightly lower. Meantime, U.S. Treasury yields rose a bit across the board yesterday, as traders prepared for news coming from the U.S. Federal Reserve later today. The VIX Volatility Index was lower, as demand for options protection waned a bit.
Looking ahead, several key economic reports will be released in the coming days. These include initial and continuing jobless claims and leading economic indicators on Thursday. On Friday, Fed Chairman Powell and a few other regional Fed chairman are slated to give remarks, which will likely provide further color into what the Fed is thinking and how it will affect upcoming meetings. Few companies will report quarterly results over the coming days, suggesting that most traders will remain focused on the Fed.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
