U.S. Stocks Turning In Lackluster Performance As Fed Decision Looms

After ending the previous session mostly higher, stocks are turning in a relatively lackluster performance in morning trading on Tuesday. The Dow and the S&P 500 are holding close to the unchanged, although the tech-heavy Nasdaq has climbed more firmly into positive territory.

Currently, the Nasdaq is off its best levels of the day but still up 57.43 points or 0.4 percent at 14,116.30. The S&P 500 is up 5.94 points or 0.1 percent at 4,560.58, while the Dow is up 12.66 points or less than a tenth of a percent at 35,423.90.

Traders may be reluctant to make more significant moves as they continue to look ahead to the Federal Reserve’s highly anticipated monetary policy announcement on Wednesday.

With the Fed widely expected to raise interest rates by another 25 basis points, traders are likely to pay close attention to the accompanying statement for clues about the outlook for rates.

Recent encouraging inflation data has led to optimism this week’s rate hike will be the last, and traders will be looking for confirmation from the Fed.

“Investors are clearly signaling that they expect this week’s announcement to mark the end of the rate-hiking cycle, followed by a series of aggressive rate cuts next year,” said John Lynch, Chief Investment Officer for Comerica Wealth Management.

He added, “While we also believe that this week’s announcement might be the final hike, we are less optimistic about the Fed’s willingness to make a dramatic dovish pivot next year as the futures market suggests.”

The uptick by the Dow comes amid strong gains by 3M (MMM) and Dow Inc. (DOW), which are surging by 5.4 percent and 4.7 percent, respectively.

The advance by 3M comes after the industrial conglomerate reported better than expected second quarter results and raised its full-year profit forecast.

Chemical giant Dow is also jumping after reporting second quarter results that exceeded expectations on both the top and bottom lines.

In U.S. economic news, the Conference Board released a report showing U.S. consumer confidence improved by much more than expected in the month of July.

The Conference Board said its consumer confidence index jumped to 117.0 in July from an upwardly revised 110.1 in June. Economists had expected the index to climb to 111.8 from the 109.7 originally reported for the previous month.

With the much bigger than expected surge, the consumer confidence index reached its highest level since July 2021.

Sector News

Despite the lackluster performance by the broader markets, steel stocks are extending the rally seen on Monday, with the NYSE Arca Steel Index spiking by 3.4 percent to a new four-month intraday high.

Computer hardware and semiconductor stocks are also seeing significant strength, contributing to the advance by the tech-heavy Nasdaq.

Chemical, housing and gold stocks have also moved to the upside, while airline stocks have moved sharply lower, dragging the NYSE Arca Airline Index down by 3.7 percent.

Alaska Air (ALK) is posting a steep loss even though the airline reported second quarter results that beat analyst estimates on both the top and bottom lines.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday. China’s Shanghai Composite Index surged by 2.1 percent and Hong Kong’s Hang Seng Index spiked by 4.1 percent, although Japan’s Nikkei 225 Index bucked the uptrend and edged down by 0.1 percent.

Meanwhile, the major European markets are turning in a lackluster performance on the day. While the French CAC 40 Index is down by 0.1 percent, the German DAX Index is up by 0.1 percent and the U.K.’s FTSE 100 Index is up by 0.2 percent.

In the bond market, treasuries are seeing further downside after turning lower over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.7 basis points at 3.904 percent.

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