The Dow Jones Industrial Average (DJI) edged up roughly 0.1%, while the S&P 500 (GSPC) rose 0.3%. The Nasdaq Composite (IXIC) gained 0.5%
Stocks searched for gains after ending Tuesday’s session lower. A bond sell-off that has pushed the 10-year yield (TNX) to its highest level since the financial crisis weighed on stock sentiment.
Crypto prices tumbled, meanwhile, after the Senate failed to pass a key procedural vote for a regulatory framework for digital assets, known as the Clarity Act. Bitcoin’s price (BTC-USD) dropped below $76,000.
Ahead of the FOMC’s rate-setting decision at 2 pm ET, Treasury bond yields and oil prices are in focus for investors, as both have moved higher in recent days. Yields on the 10-year Treasury (TNX) have reached levels not seen since 2007, while oil futures (BZ=F, CL=F) are back above $100.
Moving the other way on Wednesday morning were cryptocurrencies and crypto stocks, both selling off after a key Senate vote on the Clarity Act failed to reach the needed threshold to pass. Bitcoin (BTC-USD) dropped below $76,000.
The Federal Reserve’s September policy meeting kicked off Tuesday morning, and markets overwhelmingly expect the Fed to raise interest rates by 25 basis points on Wednesday amid persistently high inflation.
Such a move would mark the Fed’s first increase in the fed funds rate since 2023, when the Jerome Powell-led central bank concluded its post-pandemic hiking campaign. However, inflation has now remained above the Fed’s 2% target for more than five years, with the war in the Middle East serving as the latest driver of higher prices.
As Fed Chairman Kevin Warsh said in his Jackson Hole Symposium speech in August, “We have work to do.”
Still, a hold isn’t entirely off the table — even as traders price in a 92% chance of a Fed rate hike, according to CME Group’s FedWatch tool. Federal Reserve Chairman Kevin Warsh has been adamant about not providing markets with forward guidance on interest rate decisions, preferring that officials have a “good family fight” over the data at FOMC meetings.
Fed decision in focus
The Federal Reserve is due to announce its interest-rate decision later Wednesday, followed by the release of its latest economic projections, including the so-called dot plot. Fed Chairman Kevin Warsh is also scheduled to hold a press conference.
Markets were pricing in a 25-basis-point rate hike, with the CME FedWatch tool showing a 92.5% probability. The current federal funds target range is 3.5%-3.75%.
Traders were also pricing in a 45% chance of another quarter-point hike at the Fed’s October meeting and a 30% probability of a hike in December.
The rate decision comes as inflation remains above the Fed’s 2% target. Consumer prices rose 3.4% year-on-year in August, easing from a recent high of 4.2% in May. On a monthly basis, the Consumer Price Index increased 0.4%, in line with expectations, while core CPI rose 0.3%, slightly more than expected.
What if the Federal Reserve doesn’t hike rates?
European stocks rise, Asia mixed
European stocks were broadly higher in early trading, with the Stoxx 600 up about 0.4%. The FTSE 100 also gained 0.4%.
Asian markets were mixed. Japan’s Nikkei 225 fell 0.34%, while the Topix gained 0.7%. South Korea’s Kospi edged up 0.12%, while the Kosdaq declined 1.05%.
Australia’s S&P/ASX 200 rose 0.24%, while Hong Kong’s Hang Seng fell 0.18% and mainland China’s CSI 300 declined 0.42%.
Dow, S&P 500, Nasdaq futures rise with Fed rate decision in focus
US stocks edged higher in premarket trading on Wednesday, September 16, as investors awaited the Federal Reserve’s interest-rate decision, with markets bracing for what could mark the start of a fresh rate-hiking cycle.
Futures tied to the Dow Jones Industrial Average rose about 0.2%, while S&P 500 futures gained 0.2% and Nasdaq-100 futures advanced 0.4%.
The gains came after Wall Street ended lower on Tuesday, pressured by a sell-off in government bonds that pushed the benchmark 10-year Treasury yield above 5%, its highest level since the financial crisis.
Investors were also monitoring oil prices, which remained above $100 a barrel despite easing from recent highs. Brent crude futures fell 0.7% to $107.92 a barrel, while US West Texas Intermediate futures were down 1.2% at $104.55.
