Wall Street moves sideways as investors look to the Fed

  • Tesla and VF Corp are weighing on the consumer discretionary sector
  • Arm Holdings drops as Bernstein initiates coverage
  • PayPal sinks after stock downgrade
  • Indices up: Dow 0.02%, S&P 0.07%, Nasdaq 0.01%

NEW YORK, Sept 18 (Reuters) – Wall Street closed little changed on Monday as market participants looked ahead to the U.S. Federal Reserve’s expected decision to leave key interest rates unchanged on Wednesday.

All three major U.S. stock indexes ended a choppy session with nominal gains as investors, with few catalysts, showed little conviction heading into the Fed’s two-day monetary policy meeting.

“(Fed Chairman Jerome) Powell can make big moves in either direction with his comments and you don’t want to end up on the wrong side,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

The central bank has vowed to remain alert on economic data, which have shown signs that core inflation is still on its meandering descent back toward the Fed’s annual target of 2%, suggesting that the U.S. economy is still is always on a solid basis.

Against this backdrop, growing concerns that gridlock on Capitol Hill could lead to a possible government shutdown left market participants on edge.

Treasury Secretary Janet Yellen said Monday that while she sees no risk of an economic hub, she warned that a government shutdown would create a situation that could cause a loss of momentum, something we do not consider a risk need. on this point.”

The main event of the week is the Fed’s policy meeting, which is expected to culminate in a pause on rate hikes, leaving the Fed Funds target rate unchanged for the second time since March 2022, when the central bank fired its opening salvo in its fight against the inflation.

The Federal Open Markets Committee (FOMC) will also soon release its quarterly summary of economic projections, which will include the “dot plot,” or a glimpse into participating members’ expectations for the future path of interest rates.

The financial markets currently have a 99% certainty that the Fed will keep the policy rate at 5.25%-5.00% on Wednesday. Additionally, the path is less certain, with a 69% probability that the FOMC holding will happen in November, according to CME’s FedWatch tool.

“The market would like to see the dot plot come in lower than last time,” said Sam Stovall, chief investment strategist at CFRA Research in New York. “It’s a case of bad news is good news; most people would say it would be good if the summary economic projections called for an economic slowdown next year,” while assessing the timing of a potential Fed turnaround.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, September 11, 2023. REUTERS/Brendan McDermid Obtain licensing rights

On the other hand, the possibility that the easing could turn into a recession remains a top concern.

“Investors are questioning the likelihood of a slowdown versus a hard landing, and wondering whether things could get even worse than forecasters are currently predicting,” Stovall added.

The Dow Jones Industrial Average (.DJI) rose 6.06 points, or 0.02%, to 34,624.3, the S&P 500 (.SPX) gained 3.21 points, or 0.07%, to 4,453.53 and the Nasdaq Composite (.IXIC) added 1.90 points, or 0.01%, to 13,710.24.

Energy stocks (.SPNY), buoyed by rising crude oil prices, gained the most among the S&P 500’s 11 major sectors, while consumer discretionary stocks (.SPLRCD) suffered the biggest percentage decline, with Tesla Inc (TSLA.O ) weighed heaviest.

VF Corp (VFC.N) fell 4.6% after Piper Sandler downgraded the apparel company’s shares from “overweight” to “neutral.”

British chipmaker Arm Holdings fell 4.5% after Bernstein initiated coverage with an ‘underperform’ rating just days after its stellar debut.

Paypal Holdings fell 2.0% after MoffettNathanson downgraded its rating from ‘outperform’ to ‘market perform’.

Declining issues outnumbered advancing issues on the NYSE by a ratio of 1.22 to 1; on the Nasdaq, a 1.74-to-1 ratio favored the decliners.

The S&P 500 recorded six new 52-week highs and eleven new lows; the Nasdaq Composite recorded 37 new highs and 247 new lows.

Volume on U.S. exchanges was 9.44 billion shares, compared to the full-session average of 10.05 billion over the past 20 trading days.

Reporting by Stephen Culp; Additional reporting by Ankika Biswas and Shristi Achar A in Bengaluru; Editing by Aurora Ellis

Our standards: Thomson Reuters Trust Principles.

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