New York – Wall Street experienced a decline in Tuesday’s trading session, as investors adopted a risk-off approach ahead of the U.S. Federal Reserve’s two-day monetary policy meeting. All three major indexes closed lower as market participants eagerly awaited the Fed’s announcement on Wednesday, which is expected to reveal that key interest rates will remain unchanged.
“Tomorrow is a big day and the markets are closely watching for any communication changes from the Federal Reserve,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. He anticipates a strong focus on the Fed’s perspective on inflation during the post-meeting press conference.
Northey added, “While broad inflation indicators have shown significant progress over the past year, achieving the Federal Reserve’s 2 percent target is likely to become more challenging in the final stretch.”
In addition to the interest rate decision, the Fed will also release its Summary Economic Projections, including the dot plot, which provides insights into the Federal Open Market Committee’s projections for interest rates, inflation, and economic growth.
Market expectations currently reflect the likelihood of a pause in rate cuts, but there is an increased risk that rates will remain elevated for longer. A more hawkish approach by the Fed, such as removing rate cuts from the dot plot, could have significant implications for investors.
According to CME’s FedWatch tool, financial markets have priced in a 99 percent probability of the central bank maintaining its key Fed funds target rate range of 5.25 percent to 5 percent on Wednesday. Furthermore, there is a growing 70.9 percent likelihood that rates will remain unchanged at the next meeting in November.
Investor uncertainty was fueled by Canada’s rising annual inflation rate due to increasing gasoline prices and a larger-than-expected decline in U.S. housing starts.
The IPO market, however, showed signs of activity as Maplebear Inc, the parent company of grocery delivery app Instacart, made its debut on the Nasdaq. Meanwhile, chipmaker Arm Holdings experienced a strong entry into the market last week.
In terms of market performance, the Dow Jones Industrial Average fell by 106.57 points (0.31 percent) to 34,517.73, the S&P 500 declined by 9.58 points (0.22 percent) to 4,443.95, and the Nasdaq Composite dropped by 32.05 points (0.23 percent) to 13,678.19.
Out of the 11 major sectors in the S&P 500, nine ended the day in the red, with energy and consumer discretionary experiencing the largest percentage declines. Walt Disney saw a decline following the announcement of increased capital expenditure for its parks business, while Starbucks faced a downgrade from TD Cowen.
Automakers General Motors and Ford Motor Co saw gains as the United Auto Workers union planned to announce further strikes if progress was not made in ongoing talks with automakers.
On the NYSE, declining stocks outnumbered advancing ones by a ratio of 1.67-to-1, and on the Nasdaq, decliners prevailed with a ratio of 1.47-to-1. In terms of new highs and lows, the S&P 500 recorded seven new 52-week highs and nine new lows, while the Nasdaq Composite had 33 new highs and 257 new lows.
The trading volume on U.S. exchanges was 9.60 billion shares, slightly below the 10.05 billion average for the past 20 trading days.
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