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Dow Lifeless Ahead of FOMC Minutes, Stock Market Begs the Fed to Spark a Rally

Originally published on: CCN
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February 20, 2019

The Dow and U.S. stock market traded slightly higher on Wednesday, though gains were capped by speculation about China trade negotiations and the release of Federal Reserve policy meeting minutes.

DOW EKES OUT MINOR GAINS

All of Wall Street’s major benchmarks traded higher through the mid-morning. The Dow Jones Industrial Average edged up 17 points, or 0.1%, to 25,908.88. The tepid gains followed a subdued pre-market session for Dow futures that showed little upside for stocks. The blue-chip index rose by as much as 46 points earlier in the day.

dow jones

The Dow is relatively flat on Wednesday.

The broad S&P 500 Index climbed 0.1% to 2,782.62, with most of the gains concentrated in primary industries. Materials stocks rose 1.4% on average, while energy shares added 0.5%. Stocks tied to real estate, consumer staples, and health care reported losses.

A modest rally in technology and communications stocks lifted the Nasdaq Composite Index 0.3% higher to trade at 7,506.01.

The eight-week rally in share prices has zapped volatility from the markets, according to the CBOE VIX. The most widely used measure of investor anxiety declined a further 2% on Wednesday to hit 14.59. That’s the lowest since Oct. 4. For comparison, the VIX historically trades above 20.00 and it peaked north of 36.00 before Christmas Eve.

U.S. stocks experienced their best start to a year in three decades, but this chart spells trouble for the S&P 500.

FOMC MINUTES ON DECK

federal reserve chairman jerome powell

Federal Reserve Chairman Jerome Powell announced last month that interest rates will remain on hold for now. | Source: Shutterstock.

The Federal Reserve later today will release the official transcript of its January policy meeting, where officials voted to keep interest rates on hold. The minutes could reveal important clues about the pace and timing of future rate hikes, as deemed appropriate by the policy-setting board.

Members of the Federal Open Market Committee (FOMC) struck a dovish tone at their meeting last month by reinserting language referring to ‘patience’ in their approach to tightening. This came after the December downgrade on the number of rate hikes expected for 2019.

“In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,” the central bank said in a statement published Jan. 30.

Futures traders took this to mean that no additional rate hikes are coming this year. Fed Fund futures prices imply a greater likelihood of a rate cut before another upward adjustment.

The minutes will be released at 2:00 p.m. ET.

Five Federal Reserve officials are scheduled to deliver speeches in the latter half of the week. On Friday, the central bank will release its latest Monetary Policy Report.

The FOMC will not meet again until next month. The March rate statement will be accompanied by a revised summary of economic projections covering GDP, unemployment, and inflation.

Featured image courtesy of Shutterstock. Chart via TradingView.

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