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U.S. stocks on Monday ticked higher, though moves were small as market participants geared up for a big week for central banks, with the spotlight on the Federal Reserve’s rate decision on Wednesday.
The benchmark S&P 500 (SP500) advanced 0.22% to 4,460.09 points in mid-day trade, rebounding somewhat from the two-week losing streak it had notched on Friday. The blue-chip Dow (DJI) added 0.21% to 34,690.50 points, while the tech-heavy Nasdaq Composite (COMP.IND) was up 0.14% to 13,727.74 points
Of the 11 S&P sectors, eight were in positive territory. Consumer Discretionary, Real Estate and Materials were the three losers.
Energy was the top gainer as WTI crude oil futures (CL1:COM) pushed above $92/bbl, extending a gain fueled by the recent larger-than-anticipated OPEC+ production cuts.
Treasury yields were rose slightly. The longer-end 10-year yield (US10Y) was up 1 basis point to 4.33%, while the more rate-sensitive 2-year yield (US2Y) was up 3 basis points to 5.06%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
The Fed’s two-day monetary policy committee meeting kicks off on Tuesday, with markets widely anticipating the central bank to hold rates steady. The big question is what the Fed will do next, and investors will be closely watching the updated dot plot of economic and rate projections along with chair Jerome Powell’s post-decision press conference.
“A pause is widely expected at the FOMC meeting, and we have no reason to lean against consensus. The gradual cooling of the labor market should give policymakers confidence that their current stance of policy will continue to drive inflation lower over time,” Jefferies’ Thomas Simons said in a preview note.
“The rate decision looks pretty straightforward, however the (dot plot) is anything but. Policymakers need to thread a needle with their forecasts in keeping optionality open for another rate hike, if needed, while also tuning the policy rate for an anticipated decline in inflation … Chair Powell remains handcuffed in his capacity to provide much guidance in his post-meeting press conference. It remains the case that specific guidance is hard to provide when the Fed does not have certainty regarding their future policy moves,” Simons added.
Aside from the Fed, this week will also see rate decisions from the Bank of England and the Bank of Japan. Last Thursday, the European Central Bank delivered a tenth straight rate hike, while also signaling that it was the end of its tightening cycle.
The economic calendar was light on Monday, with just the NAHB housing market index on the docket. The figure dipped in September and trailed consensus.
“Fed rate hikes have not impacted existing homeowners, nearly all of whom locked in mortgage rates,” UBS’ Paul Donovan said. “However, new home owners are facing higher borrowing costs, especially relative to weaker consumer spending power.”
Turning to active movers, Tesla (TSLA) slipped nearly 3% and was among the top percentage losers on the Nasdaq Composite (COMP.IND). Goldman Sachs slightly lowered its 2023 and 2024 earning per share estimates for the electric vehicle giant, primarily on lower average selling prices. Meanwhile, the Wall Street Journal said that Tesla (TSLA) was in early talks with Saudi Arabia to build a manufacturing facility in the Middle Eastern nation, a report that top boss Elon Musk denied.
