Traders eagerly await the Fed's stance on inflation and rate adjustments, influencing the S&P 500 and Dow Jones Industrial Average's trajectories.
U.S. indices showed varied movements on Monday, with the S&P 500 dipping a marginal 0.1% and the Nasdaq Composite retracting 0.2%. Conversely, the Dow Jones Industrial Average nudged upwards, gaining 19 points. The market’s attention was primarily centered on the Federal Reserve’s imminent policy decision.
West Texas Intermediate and Brent crude prices experienced a significant surge, reaching levels unseen since the previous November. WTI has risen nearly 30% this quarter, making it the most substantial increase since Q1 2022. Meanwhile, U.S. Treasury yields saw a spike as investors eagerly anticipate insights from the Federal Reserve’s upcoming meeting. This could offer hints about potential shifts in interest rates in the subsequent months.
With the Federal Reserve meeting on the horizon, markets project a 99% likelihood that interest rates will remain static, as indicated by the CME’s FedWatch tool. Notwithstanding, a rate hike later this year hasn’t been entirely ruled out by Fed officials. Recent data, particularly inflation metrics, has been a focal point in their deliberations.
August’s consumer and producer price indices suggest a potential tempering of inflationary pressures, particularly when volatile components like food and energy are excluded. Notably, the University of Michigan’s recent consumer sentiment report signaled a notable downturn in inflation expectations.
DoorDash: Shares grew by 1.6% following an upgrade from Mizuho Securities. The firm cited robust market share and increased consumer food spending as factors potentially pushing the delivery company to exceed projections in the latter half of the year.
Micron Technology: The memory and storage solutions giant saw over 2% growth in premarket trading, driven by Deutsche Bank’s upgrade and an optimistic outlook on the company’s semiconductor pricing power.
Arm Holdings: The newly-public semiconductor firm’s shares retracted 3.7% in premarket trading, with Bernstein launching coverage with an underperform rating.
PayPal: Shares declined over 1% after a downgrade by MoffettNathanson, expressing concerns about the potential challenges awaiting PayPal’s soon-to-be CEO, Alex Chriss.
The central theme in the coming days for traders and investors alike will be the Federal Reserve’s stance on inflation and rate decisions. The overarching sentiment leans towards the Fed maintaining the current interest rate.
However, the tone – dovish or hawkish – will be pivotal in setting expectations for November and December. Recent inflation figures have mostly aligned with economists’ predictions, but any unexpected changes might stir the waters in financial markets.
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.