Nasdaq 100, Dow Jones, S&P 500: Stocks Rise Slightly Ahead of Federal Reserve’s Policy Announcement

US Stock Market Highlights

• Stocks experience slight gains ahead of Fed’s policy announcement
• Regional banking sector rebounds, with KRE up 1.4%
• ADP’s private payroll data shows greater-than-expected hiring surge

US Stock Market Overview

Investors are focusing on the Federal Reserve’s policy decision. And as a result, stocks are experiencing only a slight increase on Wednesday. The Dow Jones Industrial Average is up by 0.06%, or 23 points, shortly after the cash market opening. Meanwhile, the S&P 500 and Nasdaq Composite are both seeing gains of 0.3% and 0.37%, respectively.

In the banking sector, the SPDR S&P Regional Banking ETF (KRE) experienced a 1.4% increase after dropping more than 6% during Tuesday’s trading session. PacWest’s shares rose by 7% after declining almost 28% the previous day. Meanwhile, Western Alliance saw a 2.6% increase in their shares.

Fed to Hike Rates 25 bps; Traders Eyeing Future Rate Decisions

At 18:00 GMT, the Federal Reserve is scheduled to release its latest policy announcement. This will be followed by a news conference with Chair Jerome Powell at 18:30 GMT. Traders are currently pricing in an 86% chance of a 25 basis point rate increase, according to data from the CME Group’s FedWatch tool. Analysts on Wall Street will be watching closely for any indication of whether the central bank will continue its campaign of rate hikes or take a break.

Banking Uncertainty is Key Issue Fed

The market had a tough session on Tuesday, with the Dow, S&P 500, and Nasdaq all falling by over 1%. Ongoing concerns about contagion in the regional banking sector weighed heavily on the markets. This was particularly event following the collapse of First Republic Bank and its subsequent takeover by JPMorgan.

The banking sector is still feeling the effects of this uncertainty. Additionally, it is important to note that the Fed’s recent metrics for deciding on rate hikes could be impacted by the credit tightening happening in the economy. Therefore, the bank action should be closely monitored by the Fed, especially given the metrics provided by Fed Chair Powell in the last FOMC meeting.

Private Payrolls Surge

On Wednesday, ADP, a payroll processing firm, released private payroll data that revealed a greater-than-expected increase in hiring at private companies in April, more than twice the number that economists had predicted. This surge suggests that the labor market is still robust, despite the Federal Reserve’s efforts to slow down hiring and wage growth.

Additionally, the April ISM non-manufacturing PMI data is set to be released. A Dow Jones consensus estimate predicts a reading of 51.8, higher than the 51.2 reading from the previous month.

CVS Health Shares Drop Despite Earnings Beat

Despite a first-quarter earnings beat, with strong pharmacy results even as Covid vaccine and testing volume falls, CVS Health’s shares fell about 4% and hit a 52-week low intraday. The company lowered its 2023 forecast. This was impacted by the earlier-than-expected close of its Oak Street Health deal, leading to integration costs hitting CVS sooner than anticipated. However, despite the negative impact on its bottom line, CVS expects the deal to boost its primary-care operations.

CVS now expects to earn between $8.50 and $8.70 per share, excluding items, for this year. This is lower than its previous projection of earning between $8.70 and $8.90 per share.