Stock Market Trends Ahead of FOMC Meeting Outcomes

US labor market

The S&P 500 Index is experiencing a modest increase of +0.13%, while the Dow Jones Industrials Index is down -0.06%, and the Nasdaq 100 Index is up +0.30% today.

As the day unfolds, the S&P 500 and Nasdaq 100 have achieved 1-3/4 year highs. Contributing to this positive momentum is the U.S. November Producer Price Index (PPI) report, indicating a decrease in producer price pressures. Investors view this as dovish for Federal Reserve (Fed) policy. The focus now shifts to the outcome of the two-day Federal Open Market Committee (FOMC) meeting later today.

Anticipations for the FOMC meeting include an expectation that the Fed will maintain interest rates for the third consecutive meeting, leaving the federal funds rate target range steady at 5.25%-5.50%. Following the meeting, Fed Chair Powell is expected to conduct a press conference, with investors eager for insights into potential interest rate adjustments in the coming year.

In economic data, the U.S. November PPI final demand indicates a year-over-year easing to +0.9% from +1.2% in October, surpassing expectations. Additionally, the November PPI, excluding food and energy, shows a year-over-year decrease to +2.0% from +2.3% in October, exceeding expectations and marking the smallest increase in 2-3/4 years.

Stock highlights for the day include Vertex Pharmaceuticals, soaring more than +9% following positive results from a mid-stage study on its non-opioid drug for diabetic peripheral neuropathy. Take-Two Interactive Software is up more than +5% after being added to the Nasdaq 100 Index. Conversely, Pfizer faces a decline of more than -6%, driven by a 2024 revenue forecast well below consensus.

Market sentiment suggests a minimal chance of a +25 basis points rate hike at the current FOMC meeting, with the expectation of no hike in the subsequent meeting in January 2024. Contrarily, a -25 basis points rate cut is being anticipated with a 49% chance in the March 19-20, 2024 FOMC meeting and fully priced in (113%) for the April 30-May 1, 2024, meeting.

Government bond yields in the U.S. and Europe are lower today, with the 10-year T-note yield down at 4.157%. Overseas, stock markets exhibit mixed performance, with the Euro Stoxx 50 up +0.07%, China’s Shanghai Composite Index down -1.15%, and Japan’s Nikkei Stock Index up +0.25%.

Noteworthy stock movers include upgrades and positive news for Vertex Pharmaceuticals, Take-Two Interactive Software, Revvity, Incyte, MSCI Inc, and Mohawk Industries. On the downside, Pfizer, Southwest Airlines, American Airlines Group, United Airlines Holdings, Delta Air Lines, Moderna, Coherent, Hertz Global Holdings, Johnson Controls, and Tesla are experiencing declines.

In the bond market, March 10-year T-notes are higher, benefiting from lower-than-expected U.S. Nov producer prices. The dollar index is down by -0.06%, influenced by weaker-than-expected U.S. Nov PPI and reduced liquidity demand due to stock market strength.

Currency markets reflect a -0.08% decrease in EUR/USD, with economic concerns arising from Eurozone Oct industrial production falling more than anticipated. The USD/JPY is down by -0.14%, as the yen gains strength on lower T-note yields following the weak U.S. Nov PPI report.

Precious metals exhibit mixed performance, with gold up +0.22% and silver down -0.44%. The weaker dollar and lower global bond yields are supportive of precious metals, while silver faces pressure due to concerns about industrial metals demand after the Eurozone’s October industrial production disappointed.

Featured Image: Freepik @ wirestock

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About the author: Stephanie Bedard-Chateauneuf has over six years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, health stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.