US stocks remain lower ahead of Fed interest-rate decision
New York (Sept 18) 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 DJIA, -0.32% was down about 70 points, or 0.3%, trading around 27,040, while the S&P 500 SPX, -0.43% was about 8 points, or 0.3%, lower, at 2,999. The Nasdaq COMP, -0.71% lost 23 points, and was trading at about 8,164, also a decline of 0.3%.
On Tuesday, the Dow 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, 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.
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: Powell’s dilemma: Easing offsets trade uncertainty, but invites more of the same from Trump
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.
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, 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 BRNX19, -2.00%, 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 CLV19, -2.33% 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, -13.51% tumbled 13.5% after the logistics group missed profit expectations and cut its outlook, citing “increasing trade tensions,” and global economic sluggishness. Competitor UPS UPS, -1.61% 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
Chewy Inc.’s stock CHWY, -8.73% was off 6.3% after the pet retailer reported results.
CDW Corp.’s shares CDW, +4.51% were climbing by 5.5% on news the tech group will join the S&P 500 this month.
AT&T Inc.’s stock T, -1.02% 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, +1.41% shares rose 1.1% to a 2-year high Wednesday after the internet and phone services company’s CEO said he was “absolutely open” to the idea of being acquired.
Trade in McDermott International Inc. MDR, -48.98% stock was halted late Wednesday morning 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 TMUBMUSD10Y, -2.84% fell 6.2 basis points to 1.749%.
Read: Saudi oil attack shows bond traders are worrying more about growth than inflation
Gold prices GCZ19, +0.17% ticked up 0.2%, trading at $1,517 an ounce, while the U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, +0.05%, 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 HSI, -0.13% fell 0.1%. China’s CSI 300 Index 000300, +0.48% gained 0.5% after a 1.7% drop on Tuesday, and Japan’s Nikkei 225 index NIK, -0.18% fell 0.2%.
In Europe, the Stoxx Europe 600 SXXP, +0.02% closed virtually unchanged.
MarketWatch
