Stocks Decline Ahead Of Fed Interest Rate Decision

All Eyes On The Fed

S&P 500 futures are down by about 1% in premarket trading as traders take some profits off the table ahead of Fed Interest Rate Decision.

The Fed is expected to leave the rate unchanged, and traders will focus on the central bank’s commentary. While the commentary is projected to be very dovish, the U.S. dollar is currently gaining ground against a broad basket of currencies amid increased demand for safe-haven assets. The U.S. government bonds also enjoy stronger demand, and the yield of 10-year Treasuries has declined to 1.02%.

While the Fed Interest Rate Decision is the main event of the day, traders are also worried about COVID-19 as new strains of the virus emerge. In addition to the British strain of the virus, the world will have to deal with Brazilian and South African variants which are also spreading fast.

Germany’s Business Confidence Declines, Putting Pressure On Markets

Today, Germany reported that Business Confidence declined from 92.2 in December to 90.1 in January while analysts expected that it would decrease to 91.8.

Germany’s Business Confidence has not been that low since July 2020, so the recent report highlights a rapid deterioration of business mood.

The rapid decline of Germany’s Business Confidence has put pressure on the world markets. The German economy is the strongest economy in the Euro Area, and its problems indicate that the European economy will likely have a very challenging first quarter. In turn, these challenges may have a negative impact on multinational companies whose stocks are traded in the U.S.

Durable Goods Orders Increased By 0.2% In December

The U.S. has just provided Durable Goods Orders report for December. Durable Goods Orders grew by 0.2% month-over-month while analysts expected that they would increase by 0.9%. Excluding transportation, Durable Goods Orders increased by 0.7%.

Durable Goods Orders were weaker than expected as the transportation segment remained under pressure from the second wave of the virus. The recent economic data is pointing to a slowdown of the U.S. economy, but another stimulus package may soon provide sufficient support in case Republicans and Democrats manage to reach a consensus deal.

For a look at all of today’s economic events, check out our economic calendar.