By Chris Matthews, MarketWatch , Andrea Riquier
The Fed decision at 2p.m. ET; Saudis blame Iran for attacks
U.S. stocks traded lower midday Wednesday ahead of a Federal
Reserve decision on interest rates, and amid liquidity issues in
money markets, uncertainties over Middle-East oil supplies and more
signs that President Trump's trade war is denting corporate
profits.
How are major benchmarks faring?
The Dow Jones Industrial Average was down about 70 points, or
0.3%, trading around 27,040, while the S&P 500 was about 8
points, or 0.3%, lower, at 2,999. The Nasdaq lost 23 points, and
was trading at about 8,164, also a decline of 0.3%.
On Tuesday, the Dow
(http://www.marketwatch.com/story/us-stocks-set-to-drift-lower-as-oils-surge-takes-a-pause-2019-09-17)gained
33.98 points, or 0.1%, to close at 27,110.80, while the S&P 500
rose 7.74 points, or 0.3%, to end at 3,005.70, supported by gains
in real estate, up 1.3% and utilities, up 0.9%--sectors considered
defensive.
The Nasdaq Composite Index advanced 32.47 points, or 0.4%, to
8,186.02.
What's driving the market?
All eyes are on the Fed ahead of its afternoon policy statement,
but investors are also watching the central bank's intervention in
money markets on Wednesday to resolve unexpected liquidity
issues.
The New York Fed held a second repurchasing auction early
Wednesday
(http://www.marketwatch.com/story/fed-carries-out-repo-operation-for-second-straight-day-2019-09-18),
injecting another $75 billion by temporarily buying securities from
Wall Street dealers. The Fed on Tuesday carried out its first
overnight repurchase auction in a decade to bring the benchmark
federal-funds rate, which jumped to a high around 9%, back into a
desired 2%-2.25% range by purchasing repos worth $53 billion
(http://www.marketwatch.com/story/fed-announces-plans-to-carry-out-repo-operation-for-second-straight-day-2019-09-17-16915031).
The actions come ahead of a policy decision by the rate-setting
Federal Open Market Committee at 2 p.m. Eastern Wednesday. The
central bank is expected to reduce interest rates by a quarter of a
percentage point and communicate its future monetary-policy plans
to stave off the harmful effects of a Sino-American trade war and a
global economic slowdown.
Fed Chairman Jerome Powell is slated to host a news conference a
half-hour after the policy makers's decision is released and
analysts expect him to answer questions about the health of the
central bank's financial plumbing after its benchmark federal funds
rate rose above its target this week.
"I'm with everyone else, I expect a 25 basis-point cut, but I
wouldn't be surprised to see the language as more conservative," Ed
Keon, chief investment strategist at QMA, told MarketWatch. "A cut
today would bring real interest rates to zero and with zero rates
the case to cut further is fairly weak," given a string of
better-than-expected U.S. economic data of late.
Given market expectations that the Fed will cut at least one
more time after today, "I think a hawkish cut might hurt stocks,
not necessarily in a huge way, but a percent or two pullback."
Read:
(http://www.marketwatch.com/story/3-things-to-watch-as-fed-meets-on-interest-rates-next-week-2019-09-14)Powell's
dilemma: Easing offsets trade uncertainty, but invites more of the
same from Trump
(http://www.marketwatch.com/story/powells-dilemma-easing-offsets-trade-uncertainty-but-invites-more-of-the-same-from-trump-2019-09-18)
Markets are also watching Middle East developments after Saudi
Arabia's oil-processing hub was attacked over the weekend by
reported drone and missile attacks.
On Wednesday, Saudi Arabia's Defense Ministry exhibited debris
from the recent attack on its facilities, saying they are evidence
that Iran was "unquestionably" behind the strike, adding the attack
did not originate from Yemen to the south but from the north and
Iran. President Trump has said he does not want war with Iran
though U.S. Secretary of State Pompeo is heading to Saudi Arabia
and Trump on Wednesday called for more sanctions on Iran
(http://www.marketwatch.com/story/trump-says-hes-ordering-more-iran-sanctions-as-he-names-new-national-security-adviser-2019-09-18).
Saudi Arabia will soon restore most of its oil output and return
to normal production levels in weeks, the country's energy ministry
said Tuesday
(https://www.wsj.com/articles/saudis-have-restored-50-of-lost-production-energy-minister-11568743711),
following the attacks last weekend on the country's facilities that
hobbled the world's largest oil exporter.
The attack initially caused the Brent price , the international
benchmark, to rise 15% on Monday, the biggest single-session rise
on record dating back to 1988, but U.S. benchmark crude, West Texas
Intermediate grade and Brent oil have been giving up much of their
gains since then.
In U.S. economic news, the Commerce Department reported that
housing starts, the number of new homes on which builders have
broken ground, surged 12.3% from July to August, to a seasonally
adjusted annual rate of 1.364 million. Economists surveyed by
MarketWatch had forecast a 1.261 million pace. Permits, which
foreshadow future starts, were up 7.7%, also beating estimates.
Which stocks are in focus?
Shares of FedEx Corp.(FDX) tumbled 13.5% after the logistics
group missed profit expectations
(http://www.marketwatch.com/story/fedex-stock-down-8-after-company-lowers-outlook-on-trade-tensions-2019-09-17)and
cut its outlook, citing "increasing trade tensions," and global
economic sluggishness. Competitor UPS (UPS) also saw its stock fall
as Trump's trade war takes its toll on international traffic.
See: FedEx's stock plunges toward worst day since financial
crisis
(http://www.marketwatch.com/story/fedexs-stock-plunges-toward-worst-day-since-financial-crisis-2019-09-18)
Chewy Inc.'s stock (CHWY) was off 6.3% after the pet retailer
reported results
(http://www.marketwatch.com/story/chewy-stock-slips-after-quarterly-results-2019-09-17).
CDW Corp.'s shares (CDW) were climbing by 5.5% on news the tech
group will join the S&P 500 this month.
AT&T Inc.'s stock (T)was in focus amid reports that bankers
were pushing the telecom giant to unload its DirecTV unit. Shares
fell more than 1.3% Wednesday.
Altice USA Inc. (ATUS) shares rose 1.1% to a 2-year high
Wednesday after the internet and phone services company's CEO said
he was "absolutely open
(http://www.marketwatch.com/story/altice-usas-stock-jumps-toward-2-year-high-after-ceo-says-hes-absolutely-open-to-talks-to-be-bought-out-2019-09-18)"
to the idea of being acquired.
Trade in McDermott International Inc. (MDR) stock was halted
late Wednesday morning
(http://www.marketwatch.com/story/mcdermotts-stock-plunged-toward-record-decline-prior-to-trading-halt-for-news-pending-2019-09-18)due
to pending news. The stock fell 49% prior to the freeze, on pace
for the largest single-day decline in the stock since it went
public in 1982.
How are other markets trading?
The yield on the 10-year U.S. Treasury note fell 6.2 basis
points to 1.749%.
Read: Saudi oil attack shows bond traders are worrying more
about growth than inflation
(http://www.marketwatch.com/story/saudi-oil-attack-shows-bond-traders-are-worrying-more-about-growth-than-inflation-2019-09-16)
Gold prices ticked up 0.2%, trading at $1,517 an ounce, while
the U.S. dollar, as measured by the ICE U.S. Dollar Index , a gauge
of the buck against a basket of leading rivals, was up less than
0.1%.
In Asia overnight, Hong Kong's Hang Seng Index fell 0.1%.
China's CSI 300 Index gained 0.5% after a 1.7% drop on Tuesday, and
Japan's Nikkei 225 index fell 0.2%.
In Europe, the Stoxx Europe 600 closed virtually unchanged.
(END) Dow Jones Newswires
September 18, 2019 13:32 ET (17:32 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.