4:15pm: Conditions 'coming into place' to tamp down inflation, Powell said
The Dow closed Wednesday down 233 points, 0.7%, at 33,979, the Nasdaq Composite rose 53 points, 0.4%, to 13,626 and the S&P 500 added 4 points to 4,373. The small-cap Russell 2000 index slid 25 points, 1.3%, to 1,871.
The market initially tumbled when the Federal Reserve announced it wouldn't be raising rates but implied too more hikes would come later this year. But comments from Chair Jerome Powell stemmed the selloff tide.
“I would almost say that the conditions that we need to see in place to get inflation down are coming into place,” Powell said at his post-meeting news conference.
2:55pm: Rate pause prods markets lower for a moment
The major US benchmarks took a brief dip downward after the FOMC announced that it would not issue an 11th consecutive interest rate hike following its June meeting. The S&P and Nasdaq Composite both briefly joined the Dow in the red but have since partially recovered.
Roughly 45 minutes after the announcement, the Dow was down 255 points, 0.7%, to 33,957, the Nasdaq Composite rose 24 points, 0.2% to 13, 601 and the S&P 500 gained 1 point to 4,370.
12:05pm: Stocks struggle for direction before Federal Reserve announcement
US stocks were mixed in noon trading as investors were cautious ahead this afternoon’s Federal Reserve interest rate decision and press conference.
At midday, the Dow lost 98 points to 34,114, while the S&P 500 added 14 points at 4,383 and the tech-heavy Nasdaq gained 49 points to 13,622.
“It has been a positive session for most indices, aside from the Dow, which has struggled thanks to weakness in healthcare stocks,” IG chief market analyst Chris Beauchamp said.
“Investors seem relatively confident that the Fed will leave rates unchanged this afternoon,” he added.
Notable movers included shares of Advanced Micro Devices, Inc, which rose 2% following a Reuters report that Amazon Web Services is considering using AMD’s new artificial intelligence chips.
10:55am: Stocks making moves
Chipmaker Advanced Micro Devices Inc was up 1.5% in midmorning trading after news broke that Amazon Web Services is considering buying its new AI chips.
Meanwhile, Logitech's US-listed shares took a hit after the abrupt departure of its CEO, losing nearly 12% in New York.
Healthcare stocks were also broadly lower on concerns about rising medical costs. UnitedHealth Group Inc, one of the country's largest insurers, warned that its second quarter may be affected as more older adults undergo non-urgent procedures they had delayed during the pandemic.
9:40am: Rate hike pause priced in
US stocks were mixed at the open on Wednesday as investors looked ahead to Fed chair Jerome Powell’s highly anticipated speech at the conclusion of the latest FOMC meeting this afternoon.
Just after the opening bell, the Dow Jones had shed 130 points or 0.4% at 34,083 points, the Nasdaq was down 15 points or 0.1% at 12,560 points, while the S&P 500 was flat at 4,369 points.
TickMill Group analyst James Harte said yesterday’s inflation data has seen the market move to fully price in a rate pause at the FOMC later today.
“The USD has softened accordingly while risk assets have moved firmly higher. Equities and commodities have seen fresh demand as have risk currencies,” he pointed out.
“Looking ahead to today’s meeting, the focus will be on the guidance the Fed issues and its new rate projections. While the Fed is likely to still signal further tightening, the outlook might be less hawkish than many were anticipating prior to yesterday’s data which, if seen, should drive USD lower near-term, allowing risk assets room to move higher.”
8:50am: Inflation cooling
In another sign inflation continues to ease on the back of the Fed’s aggressive interest rate hikes, wholesale inflation declined more than expected in May, falling 0.3% month-over-month according to the latest Producer Price Index (PPI) data from the US Bureau of Labor Statistics.
The Street had been expecting a monthly decline of 0.1%.
In the 12 months that ended in May, the index moved up 1.1%, the smallest year-over-year gain since December 2020.
Core wholesale inflation, which excludes the more volatile food and energy components, was up 0.2% month-over-month and 2.8% on an annualized basis.
7:45am: All eyes on the Fed
US stock indexes are expected to open mixed on Wednesday as investors look ahead to the Federal Reserve’s latest policy decision and subsequent press conference, due at 2.15pm ET this afternoon, with interest rates expected to be held steady.
In pre-market trading, futures for the Dow Jones Industrial Average (DJIA) were 0.2% lower, but those for the broader S&P 500 futures added 0.2%, and contracts for the tech-laden Nasdaq-100 were up 0.1%.
On Tuesday, the DJIA rose nearly 146 points, or 0.4%, to close at 34,212, while the S&P 500 and Nasdaq Composite gained 0.7% and 0.8%, respectively. Both the S&P 500 and Nasdaq touched their highest levels since last April during the session.
Markets are expecting a 90% chance that the US central bank will keep interest rates unchanged at the current target of 5.00% to 5.25%, a pause following a streak of 10 straight increases.
Aside from the Fed’s policy announcement, investors are preparing for chair Jerome Powell’s remarks to the media, where he may give insight into the state of the economy and the central bank’s path going forward.
On the data front, May’s producer price index is due on Wednesday morning, with economists polled forecasting a decline of 0.1% in wholesale inflation.
On Tuesday, May’s reading of the consumer price index showed the lowest annual consumer inflation increase in more than two years.
Han Tan, chief market analyst at Exinity Group commented: "The Fed is widely expected to hit the pause button today on its rate hike campaign that began over a year ago, before hiking once more in the third quarter. The notion for a Fed 'skip' was bolstered by yesterday’s CPI data that point to slowing US inflation. An unexpected rate hike today would shock markets."
He added: "Ultimately, markets will be laser-focused on the Fed’s signals about future policy moves as contained within the FOMC policy statement, dot plot, and Chair Powell’s press conference.
"If the Fed suggests that its benchmark rates have to move even higher, beyond the sole remaining 25-bp hike forecast by markets, that should translate into an immediate boost for the US dollar while eroding support for gold. The thought that the Fed still has to work harder to achieve its inflation target may also give equity bulls reason to pause their heady ascent of late.
"Should Powell and co. deliver on the market’s existing expectations, or even offer up hints of dovishness, that should allow US stocks to hop higher and add to recent gains."