Wednesday June 19th

19-06-2019

Stocks’ comeback rally set to pause as traders await the Fed rate decision

U.S. stock index futures were little changed on Wednesday morning as investors waited for the Federal Reserve’s latest decision on monetary policy. Around 7 a.m. ET, Dow Jones Industrial Average futures were up just 6 points, indicating a gain of 29 points. Futures on the S&P 500 and Nasdaq 100 were also flat. The Fed is scheduled to deliver its decision at 2 p.m. ET. The central bank is not expected to make any changes in terms of monetary policy, but investors will look for clues on whether the Fed will cut rates later this year. Fed Chair Jerome Powell will hold a news conference after the announcement. Traders are pricing in easier monetary policy as soon as July. They are also betting on rate cuts coming in September and December, according to the CME Group’s FedWatch tool. “The bottom line with today’s FOMC statement and Powell press conference is whether they confirm the markets expectations for a rate cut (currently at 82%) in July or will we hear more about patience that tries to shift those odds closer to 50%, thus giving the Fed more independence and optionality instead of their current position of being cornered and bullied by the market,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, said in a note. Stocks have not fared well in recent Fed days. The S&P 500 has fallen in nine of the past 10 Fed days, according to Bespoke Investment Group. Expectations of lower rates helped the market rebound this month after a torrid performance in May. The S&P 500, Dow and Nasdaq were all up at least 6% in June entering Wednesday’s session. Those expectations increased amid lingering trade worries and weaker economic data. The Fed’s meeting comes after Bloomberg News reported the White House looked for a way to demote Powell earlier this year. Larry Kudlow, director of the National Economic Council, told reporters Tuesday that Trump is not planning to demote Powell, however. Still, when asked Tuesday whether he wants to remove Powell from his position, Trump said: “Let’s see what he does.” There’s a special focus on the outcome of the Federal Reserve meeting Wednesday. Not only are traders are keen to understand the chances of rate cuts this year, but they are also interested to know if President Donald Trump has any influence on the central bank. Stocks in Asia rose on Wednesday following positive developments overnight on the U.S.-China trade front. Mainland Chinese stocks gained on the day, as the Shanghai composite rose 0.96% to 2,917.80 and the Shenzhen component gained 1.38% to 8,925.73, while the Shenzhen composite added 1.475% to 1,526.77. Hong Kong’s Hang Seng index also jumped 2.35%. Over in South Korea, the Kospi rose 1.24% to close at 2,124.78. In Japan, the Nikkei 225 jumped 1.72% on the day to 21,333.87. The Topix index also added 1.74% to finish its trading day at 1,555.27. Oil prices ticked down on Wednesday as data suggesting a smaller-than-expected fall in U.S. crude inventories countered support from hopes for a U.S.-China trade deal. Brent crude futures were down 46 cents at $61.68 a barrel. U.S. West Texas Intermediate crude fell 3 cents to $53.87 a barrel. On Tuesday, it had recorded its biggest daily rise since early January. Gold prices fell on Wednesday as optimism over Sino-U.S. trade talks and hopes of rate cut from central banks hit demand for bullion ahead of the U.S. Federal Reserve’s monetary policy decision later in the day. Spot gold fell 0.3% to $1,341.67 per ounce. U.S. gold futures slipped 0.4% to $1,345.70 per ounce.