US Stock Market Overview – Stocks Slide Ahead of Fed Meeting

US stocks were lower on Tuesday ahead of the Federal Reserve decision. Expectations are that the Fed will reduce interest rates by 25-basis points, but the statement that follows will likely drive share prices. President Trump was on the wire today. He was complaining about the Fed and ranting about the Chinese trade issue. He said that the Chinese will get a much worse deal if he wins. He also said that the Fed had made a horrible mistake in raising interest rates, and should become more accommodative immediately.

Chinese and US negotiators resumed trade talks. The US team, led by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, gathered for dinner Tuesday with the Chinese side, according to reports.

US Consumer spending Rose in June

The US commerce department reported on Tuesday that US consumer spending and prices rose moderately in June, pointing to slower economic growth and benign inflation. This is the last piece of data the Fed will see before their rate decision. Consumer spending gained 0.3% as an increase in services and outlays on other goods offset a decline in purchases of motor vehicles. May data was revised to show consumer spending increased by 0.5% instead of the previously reported 0.4% advance. Expectations were for consumer spending to rise by 0.3% last month. Consumer spending increased at a 4.3% annualized rate, accelerating from a tepid 1.1% pace in the January-March period.

Consumer prices as measured by the personal consumption expenditures (PCE) price index edged up 0.1% in June as food and energy prices fell. The PCE price index gained 0.1% in May. On a year over year basis PCE price index rose 1.4% after a similar increase in May. Excluding the volatile food and energy components, the PCE price index rose 0.2% last month. That lifted the annual increase in core PCE prices to 1.6% from 1.5% in May. The core PCE index is the Fed’s preferred inflation gauge which is lower than the central bank’s 2% target this year. The Fed is likely to point to this number when it makes its statement and describes why it can lower interest rates.

The Bank of Japan Keeps Rates Unchanged

Japan reported weaker than expected industrial production ahead of the BOJ decision which dropped 3.6% in June, which is twice what the median forecast expected. IP dropped 4.1% year over year from 2.1% in May. Despite the weak number the BOJ left rates unchanged. The central bank reduced its GDP forecast for the fiscal year to 0.7% from 0.8%.