U.S. Stocks, Treasuries Drift Before Fed Decision: Markets Wrap

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U.S. Stocks, Treasuries Drift Before Fed Decision: Markets Wrap

U.S. stocks were mostly little changed as investors turned cautious before a policy decision from the Federal Reserve. Yields on benchmark 10-year Treasury notes were little changed.

The S&P 500 fluctuated between gains and losses, with the health care, utilities and technology sectors gaining. Consumer staples and financial shares were in the red. Apple and Microsoft lifted the Nasdaq Composite higher. The dollar fluctuated versus major peers. Crude oil added to its post-pandemic high of more than $72 a barrel.

Investors are marking time before the Fed’s policy decision due at 2 p.m. Eastern time, as concerns mount that officials could pencil in a timetable for tapering stimulus injections that have driven a market boom. The latest statement is set to include updated projections for interest rates and economic forecasts.

“People are trying to get some gauge of what the Fed is going to come out with,” said Andrew Mies, chief investment officer at 6 Meridian. “Is Powell going to acknowledge there is going to have to be tapering talk this year?”

With inflation and economic growth accelerating this year, Fed Chair Jerome Powell and his colleagues may consider moving up a discussion on scaling back monetary stimulus and laying the groundwork for the first post-pandemic interest rate hike as soon as 2023.

“The Fed is likely to acknowledge the risk to the economy is more balanced as the number of Covid cases has plummeted coupled with the strengthening labor market,” said Jeff Schulze, investment strategist at ClearBridge Investments. “But I think the key in the official statement is that they are going to continue to stress that this is transitory inflation and nothing to change their longer term view.”

Elsewhere, China ordered state firms to curb overseas commodities exposure to rein in soaring raw materials prices. Copper reversed gains on the moves.

Bitcoin fell below $40,000, retreating from its highest closing level since May.

The British pound gained on the dollar as inflation surged unexpectedly past the Bank of England’s target for the first time in almost two years.

For more market commentary, follow the MLIV blog.

Here are some key events to watch this week:

  • U.S. President Joe Biden and Russia’s Vladimir Putin are meeting Wednesday in Geneva
  • U.S. Treasury Secretary Janet Yellen testifies before a House panel Thursday on the federal budget
  • Rate decisions come from Switzerland and Norway on Thursday
  • The Bank of Japan’s monetary policy decision is on Friday

These are some of the main moves in markets:

Stocks

  • The S&P 500 was little changed as of 11:36 a.m. New York time
  • The Nasdaq 100 rose 0.1%
  • The Dow Jones Industrial Average fell 0.1%, falling for the third straight day, the longest losing streak since June 9
  • The Stoxx Europe 600 rose 0.2% to a record high
  • The MSCI World index was little changed

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $1.2116
  • The British pound rose 0.1% to $1.4103
  • The Japanese yen rose 0.1% to 109.93 per dollar

Bonds

  • The yield on 10-year Treasuries was little changed at 1.49%
  • Germany’s 10-year yield declined two basis points to -0.25%
  • Britain’s 10-year yield declined one basis point to 0.74%

Commodities

  • West Texas Intermediate crude rose 1.1% to the highest on record
  • Gold futures rose 0.2% to $1,860.50 an ounce

Source

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