Wall Street saw declines on Tuesday as risk-off sentiment prevailed, with investors cautious ahead of the U.S. Federal Reserve’s pivotal two-day monetary policy meeting.
All three major indices closed lower in a broad sell-off, with the market eagerly awaiting the Fed’s interest rate announcement scheduled for Wednesday. The consensus expectation is that the central bank will opt to maintain key interest rates at their current levels.
Bill Northey, senior investment director at U.S. Bank Wealth Management in Helena, Montana, noted the significance of the upcoming Fed meeting, saying, “It’s a big setup coming into tomorrow, and markets are clearly focused on any change in communication from the Federal Reserve.” He also emphasized the anticipated scrutiny of the Fed’s perspective on inflation during the post-meeting press conference.
“Broad inflation readings have shown marked progress over the last year,” Northey added, “but the last mile of inflation is likely going to be more challenging, bringing it back toward the Federal Reserve’s target of 2%.”
The Fed is set to release its Summary Economic Projections, including the highly anticipated dot plot, offering insights into the Federal Open Market Committee’s projections regarding interest rates, inflation, and economic growth.
Michael Green, chief strategist at Simplify Asset Management in Philadelphia, highlighted the current market expectations, stating, “What’s being priced into the market is a pause but increased risk that rates will stay higher for longer. If (the Fed) announced that they are removing rate cuts in 2024 by raising the dot plot, it would generally be seen as a very hawkish pause.”
According to CME’s FedWatch tool, financial markets have already factored in a near-certain 99% probability that the central bank will maintain its key Fed funds target rate at 5.25%-5.00% on Wednesday, with a growing 70.9% likelihood of a similar stance at the November meeting.
Economic developments on Tuesday included a surge in Canada’s annual inflation rate driven by rising gasoline prices and a larger-than-expected decline in U.S. housing starts, contributing to investor uncertainty.
Amid the cautious market sentiment, the IPO market displayed signs of vitality, with grocery delivery app Instacart’s parent company, Maplebear Inc, making its Nasdaq debut, following the impressive entry of chipmaker Arm Holdings (NASDAQ: ARM) into the public market last week. Maplebear shares gained 12.3%, while Arm Holdings experienced a 4.9% dip.
The Dow Jones Industrial Average declined by 106.57 points, or 0.31%, settling at 34,517.73, while the S&P 500 saw a loss of 9.58 points, or 0.22%, closing at 4,443.95. The Nasdaq Composite dropped 32.05 points, or 0.23%, concluding at 13,678.19.
Of the 11 major sectors in the S&P 500, nine ended the session in the red, with energy and consumer discretionary experiencing the most significant percentage declines.
Walt Disney (NYSE: DIS) slid after announcing a nearly doubled capital expenditure plan for its parks business over the next decade.
Starbucks (NASDAQ: SBUX) declined following TD Cowen’s decision to downgrade the coffee chain’s shares to “underperform.”
Automakers General Motors (NYSE: GM) and Ford Motor (NYSE: F) Co advanced as the United Auto Workers union prepared to announce further strikes on Friday if significant progress isn’t made in ongoing talks with automakers.
Declining issues surpassed advancing ones on the NYSE by a 1.67-to-1 ratio, while on Nasdaq, a 1.47-to-1 ratio favored decliners.
The S&P 500 achieved seven new 52-week highs and recorded nine new lows, while the Nasdaq Composite reached 33 new highs and 257 new lows.
Trading volume on U.S. exchanges reached 9.60 billion shares, slightly below the 10.05 billion average over the last 20 trading days.
