Looming Fed Meeting May Lead To Choppy Trading On Wall Street

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September 18 2023 05:05AM

US Market

The major U.S. index futures are currently pointing to a roughly flat open on Monday, with stocks likely to show a lack of direction following the volatility seen to close out the previous week.

Traders may be reluctant to make significant moves as they look ahead to the Federal Reserve’s monetary policy announcement on Wednesday.

The Fed is widely expected to leave interest rates unchanged, but traders will pay close attention to the accompanying statement and the central bank’s projections for clues about the outlook for rates.

While CME Group’s FedWatch Tool is currently indicating a 99.0 percent chance the Fed will leave rates unchanged this week, the outlook for the November meeting is somewhat more mixed.

The FedWatch Tool is indicating a 69.0 percent chance rates will remain unchanged in November but a 30.7 percent chance of another quarter point rate hike.

“How the Fed delivers the pause is crucial for November and December rate expectations, but whether it’s presented with a dovish or hawkish tilt is what matters most for financial markets,” said Quincy Krosby, Chief Global Strategist for LPL Financial. “The Fed, and Fed Chair Powell particularly, will emphasize that they remain data dependent.”

She added, “Financial markets are even more keenly data dependent, and the wrapping of the pause, with a dovish or hawkish angle, is key for the market’s direction.”

Stocks moved sharply lower over the course of the trading day on Friday, giving back ground following the rally seen on Thursday. The major averages all showed notable moves to the downside, with the tech-heavy Nasdaq leading the pullback.

The major averages all finished the day firmly in negative territory. The Nasdaq tumbled 217.72 points or 1.6 percent to 13,708.33, the S&P 500 slumped 54.78 points or 1.2 percent to 4,450.32 and the Dow slid 288.87 points or 0.8 percent to 34,618.24.

For the week, the major averages turned in a mixed performance. While the Dow inched up by 0.1 percent, the S&P 500 slipped by 0.2 percent and the Nasdaq fell by 0.4 percent.

The pullback on Wall Street partly reflected profit taking, with some traders cashing in on Thursday’s gains ahead of this week’s Federal Reserve meeting.

While the Fed is widely expected to leave interest rates unchanged, the latest batch of U.S. economic data reignited concerns about the possibility of future rate hikes.

The Labor Department released a report this morning showing a bigger than expected increase in U.S. import prices in the month of August as well as a much bigger than expected surge in U.S. export prices.

The Labor Department said import prices climbed by 0.5 percent in August after a downwardly revised 0.1 percent uptick in July.

Economists had expected import prices to rise by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Meanwhile, the report said export prices spiked by 1.3 percent in August after climbing by a downwardly revised 0.5 percent in July.

Economist had expected export prices to increase by 0.3 percent compared to the 0.7 percent advance originally reported for the previous month.

A separate report released by the New York Fed showed a substantial turnaround in New York manufacturing activity in the month of September.

The Federal Reserve also released a report showing U.S. industrial production increased by much more than expected in the month of August.

The report said industrial production climbed by 0.4 percent in August following a downwardly revised 0.7 percent advance in July.

Economists had expected industrial production to inch up by 0.1 percent compared to the 1.0 percent jump originally reported for the previous month.

Meanwhile, traders largely shrugged off a report from the University of Michigan showed a notable decrease in near-term and long-term inflation expectations.

Semiconductor stocks moved sharply lower over the course of the session, resulting in a 3.0 percent plunge by the Philadelphia Semiconductor Index.

Substantial weakness was also visible among software stocks, as reflected by the 2.3 percent slump by the Dow Jones U.S. Software Index.

Adobe (ADBE) posted a steep loss despite reporting fiscal third quarter results that exceeded analyst estimates on both the top and bottom lines.

Housing stocks also saw considerable weakness on the day, with the Philadelphia Housing Sector Index tumbling by 2.1 percent.

Retail, energy and computer hardware also moved notably lower, while gold stocks were among the few groups to buck the downtrend amid an increase by the price of the precious metal.

U.S. Economic Reports

The National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of September at 10 am ET. The housing market index is expected to come in unchanged compared to the 50 seen in August.

Stocks in Focus

Shares of DoorDash (DASH) are moving notably higher in pre-market trading after Mizuho Securities upgraded its rating on the food delivery service’s stock to Buy from Neutral.

Chipmaker Micron Technology (MU) may also move to the upside after Deutsche Bank upgraded its rating on the company’s stock to Buy from Hold.

On the other hand, shares of PayPal (PYPL) may see initial weakness after MoffettNathanson downgraded its rating on the financial technology company to Market Perform from Outperform.


European stocks are mostly in negative territory on Monday, with investors largely staying cautious ahead of central bank meetings.

The Federal Reserve’s monetary policy announcement is due on Wednesday, while the Bank of England (BoE) and the Bank of Japan (BoJ) are scheduled to announce their policy moves on Thursday. The BoE is widely expected to hike interest rates by 25 basis points.

While the French CAC 40 Index is down by 1.0 percent, the German DAX Index is down by 0.7 percent and the U.K.’s FTSE 100 Index is down by 0.3 percent.

In the UK market, Persimmon, CRH, Prudential, British Land Company, Entain, Rightmove, Auto Trader Group and WPP are down 2 to 3 percent.

EasyJet, TUI, ITV, Carnival, Johnson Matthey, Segro, Rolls-Royce Holdings, IAG and Fresenillo are also notably lower.

Mondi is climbing 4.3 percent and Royal Mail is advancing 2.5 percent. Hikma Pharmaceuticals, Phoenix Holdings and Admiral Group are also posting strong gains.

In the German market, Infineon, MTU Aero Engines, HeidelbergCement, Volkswagen and Porsche are down 1.7 to 3 percent.

Munic RE, Puma, Fresenius, Daimler Truck Holding and Hannover Rueck are posting moderate gains.

In Paris, Societe Generale is plunging nearly 10 percent after its Chief Executive Slawomir Krupa cut profitability targets and forecast slower growth, unveiling what he called a “realistic” new plan. The bank said it would target a return on tangible equity of between 9 and 10 percent by 2026 versus a previous target of a 10 percent return by 2025.

Capgemini, WorldLine, LVMH, BNP Paribas, STMicroElectronics, Kering, Publicis Groupe, Edenred, ArcelorMittal, Credit Agricole, Hermes International and Renault are down 1 to 2.5 percent.


Asian markets finished Monday’s trading on a mixed note at the outset of a new week marked by monetary policy decisions by the Federal Reserve, the Bank of Japan and the Bank of England. Minutes from the Reserve Bank of Australia are also due for release early this week. Meanwhile, Japanese markets were closed for a holiday.

China’s Shanghai Composite Index gained 8.19 points or 0.3 percent to finish trading at 3,125.93. The day’s trading ranged between 3,128.70 and 3,098.50. The Shenzhen Component Index added 55.44 points or 0.6 percent to close at 10,200.04.

The Hang Seng Index of the Hong Kong Stock Exchange shed 252.34 points or 1.4 percent from the previous close to finish trading at 17,930.55. The day’s trading range was between a high of 18,114.82 and a low of 17,894.81.

The Korean Stock Exchange’s Kospi Index declined 26.56 points or 1.0 percent to close trading at 2,574.72. The day’s trading range was between 2,573.26 and 2,596.55.

Australia’s S&P/ASX200 Index closed trading at 7,230.40, shedding 48.60 points or 0.7 percent. The index had gained more than a percent in the last five days but sits 4.5 percent below its 52-week high. The day’s trading range was between 7,223 and 7,279.

Paladin Energy rallied 4.19 percent. ASX, Fisher & Paykel Healthcare Corp., Alumina and Auckland International Airport all gained more than 1 percent.

Silver Lake Resources plunged 8.3 percent. Brainchip Holdings and Syrah Resources both dropped more than 6 percent. Healthcare business Polynovo and investment business Washington H Soul Pattinson both declined more than 5 percent.

The NZX 50 Index of the New Zealand Stock Exchange added 49.27 points or 0.4 percent to close at 11,397.00. Trading ranged between 11,312.80 and 11,405.39.

Fonterra Shareholders Fund topped with a gain of 4.1 percent followed by Restaurant Brands New Zealand, which rallied 3.7 percent. Summerset Group Holdings, Spark New Zealand and Scales Corporation all gained more than 1 percent.

Synlait Milk plunged 9.4 percent after second-largest shareholder a2 Milk canceled exclusive manufacturing and supply rights for some of its infant milk formula products.

Vista Group International dropped 4 percent, followed by Manawa Energy and Precinct Properties New Zealand that both declined more than 3 percent. Tourism Holdings declined 2.4 percent.   


Crude oil futures are jumping $0.95 to $91.72 a barrel after rising $0.61 to $90.77 a barrel last Friday. Meanwhile, after climbing $13.40 to $1,946.20 an ounce in the previous session, gold futures are inching up $1.90 to $1,948.10 an ounce.

On the currency front, the U.S. dollar is trading at 147.67 yen versus the 147.85 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.0658 compared to last Friday’s $1.0657.