S&P 500; US Indexes Fundamental Daily Forecast – Will Stock Rally Lose Steam into Fed Announcements?

The major U.S. stock indexes opened sharply higher on Wednesday with the Dow opening over 200 points higher. If the markets are able to hold on to their early gains then they will erase close to half of their two-day sell-off earlier in the week.

At 1431 GMT, the benchmark S&P 500 Index is trading 2834.84, up 12.41 or +0.44%. The blue chip Dow Jones Industrial Average is at 26309.41, up 232.52 or +0.89% and the tech-based NASDAQ Composite is at 7446.14, up 43.66 or +0.59%.

Rising Treasury yields have put pressure on the markets this week, but today, investors are back on track with positive reactions to President Trump’s State of the Union address last night, strong earnings and a robust ADP Private Sector jobs report.

Earlier today, Boeing, Eli Lilly and Anthem reported better than expected quarterly results. Their earnings and revenue topped analyst expectations. So far this earnings season, corporate earnings have mostly surpassed analyst expectations.

Of the S&P 500 companies that had reported as of Tuesday morning, 80 percent have posted better-than-expected earnings, while 81 percent have beaten top-line estimates, according to Thomson Reuters.

In economic news, ADP and Moody’s Analytics Wednesday said private companies added 234,000 jobs in January. Economists polled by Reuters expected a gain of 185,000.

Later this morning, investors will get the opportunity to react to the Chicago PMI report. It is expected to come in at 64.2, down from 67.6. Pending Home Sales are expected to rise 0.5%, up from 0.2%.

Additionally, stocks may be sensitive to the energy market so investors should pay attention to the U.S. Energy Information Administration’s weekly inventories number, due to be released at 1530 GMT. It is expected to show a build of 100,000 barrels. Late Tuesday, the American Petroleum Institute’s inventories report showed a larger-than-expected drawdown.

At 1900 GMT, the Fed is going to announce its interest rate decision and release its monetary policy statement. It is widely expected to leave interest rates unchanged. Traders will be looking for hints as to the timing and the number of potential rate hikes in 2018 as well as its outlook for inflation.

Since stocks have been sensitive to rising Treasury yields this week, a hawkish Fed could put a lid on stock prices later in the session and may even trigger an intraday reversal to the downside.