U.S. stocks opened slightly higher Wednesday morning as investors awaited the Federal Reserve’s latest monetary policy decision.
The Dow Jones Industrial Average opened 50 points higher as gains McDonald’s and Home Depot offset losses in American Express and Johnson & Johnson. The broad S&P 500 index rose 0.2 percent as energy and materials each rose at least 0.5 percent.
The Nasdaq Composite added 0.1 percent as Adobe rose 1 percent, Alphabet added 0.5 percent and Netflix added 0.6 percent.
Healthy GDP numbers and an unemployment rate at 3.7 percent are expected to keep Fed Chair Jerome Powell and his colleagues on track for a fourth and final rate hike of 2018 when it concludes a two-day policy meeting on Wednesday.
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The central bank will release its decision on interest rates at 2:00 p.m. ET, though many market participants said that they anticipate the Fed to signal that it will slow the pace of further increases to the federal funds rate in 2019.
“The Fed will likely be ‘dovish’ but it probably won’t produce a policy framework that aligns with the present market view (which is barely pricing in any hikes in 2019),” wrote Adam Crisafulli, executive director at J.P. Morgan Chase. Crisafulli added that likely outcome is that “the December federal funds rate is hiked but Powell suggests tightening will be on hold for the foreseeable future and ‘further gradual increases’ is removed from the statement.”
The Fed viewed as likely to take the fed funds rate range to 2.25 to 2.50 percent and to remove language in its post-meeting statement that says it will continue with “gradual” rate increases. Powell will speak at a press conference at 2:30 p.m. ET.
While traders see the odds of a quarter-point rate hike above 70 percent, investors will likely scrutinize — and react to — the Fed’s outlook for 2019. Complicating matters further for the central bank, President Donald Trump warned Tuesday that it must tread carefully in order not to “make yet another mistake;” strategists expect the Fed Chair to skirt addressing the president’s comments.
Stocks were also supported Wednesday morning on news of a bipartisan Senate plan to avoid a government shutdown. Last night, Senate Appropriations Committee Chairman Richard Shelby, R-Ala., told reporters “we’re working” on drafting a continuing resolution (CR) until early February but that “ultimately it’s up to the Leader,” according to NBC News.
The uptick in U.S. equities came despite a downturn in FedEx stock, which slid more than 6 percent in premarket trading after the company lowered its 2019 earnings guidance and reported weakness in its international business.
“I’ll just conclude by saying most of the issues that we’re dealing with today are induced by bad political choices,” FedEx Chairman and CEO Frederick Smith said in a conference call Tuesday. “I mean, making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state-owned enterprise initiatives in China, the tariffs that the United States put in unilaterally. So you just go down the list, and they’re all things that have created macroeconomic slowdowns.”
Source: cnbc.com | Original Link