The major market averages trade cautiously on Wednesday with the Federal Reserve rate decision in view.
Early on and the Nasdaq Composite (COMP:IND) was -0.2%, the S&P 500 (SP500) was -0.2%, and the Dow (DJI) was +0.1%.
AMD (AMD), Super Micro (SMCI) and Starbucks (SBUX) weigh on markets following earnings reports, while Amazon (AMZN) lent some support.
Super Micro Computer (SMCI) was down more than 10% as it missed its quarterly revenue estimates. AMD (AMD) also slipped by 6%, after the semiconductor firm reported first-quarter results and guidance that were largely in-line with expectations.
The 10-year Treasury yield (US10Y) dipped 4 basis points to 4.64%. The 2-year yield (US2Y) fell 4 basis points to 4.99%.
The Fed’s two-day meeting will conclude today, and the FOMC is expected to announce its policy decision at 2:00 pm ET, with Powell’s press conference scheduled for 2:30 pm ET. It is widely accepted that rates will be held steady, but investors will be eagerly waiting for the press conference to look for hints on the Fed’s path in the year.
“In terms of the Fed’s decision, it’s widely expected that they’ll leave rates unchanged today. But given the recent inflation data, our US economists think there’ll be a more hawkish-leaning message, echoing chair Powell’s view that it will take longer to gain confidence about disinflation,” said Deutsche Bank’s Jim Reid.
“The key market-moving moment will likely be when Fed Chair Powell is probed on how the economy and inflation are evolving relative to the FOMC’s expectations of three cuts,” said Steve Englander of Standard Chartered.
Englander expects a formulation that says the FOMC still broadly sees policy rate cuts as the base case for its next move, but there is no hurry on such cuts.
“The assumption is that chair Powell will pour cold water on hopes of near-term policy easing and concede that inflation is above target and sticky while growth is resilient,” said Kit Juckes, FX strategist, Societe Generale.
“Chair Powell is unlikely to slam the door definitively on a June rate cut at his press conference today, but he will leave markets in no doubt that the data over the next six weeks would have to be extraordinary in order to push the FOMC into action,” said Pantheon Macroeconomics.
The U.S. private sector employment stayed strong in April as the ADP Jobs Report came in at +192K versus the forecasted +175K level.
The U.S. PMI Manufacturing Index ticked up to 50.0 in April’s final reading from 49.9 in the initial estimate and 51.9 in March.
Additionally, the number of U.S. job openings fell more than expected in March. Job openings came in at 8.488M compared to the forecasted 8.680M level.