Market Snapshot: Dow down nearly 170 points as Fed begins 2-day meeting

What’s driving the market?

Apart from the occasional dip, stocks have largely pressed higher on expectations vaccine rollouts and another $1.9 trillion dose of COVID-19 relief spending by the U.S. government will fuel an acceleration in economic growth and corporate profits in 2021.

“The accelerated pace of vaccinations in America and the imminent spending boom seem to have reawakened a thirst for risk-taking among investors, who are front-running what will probably be a stellar summer in economic data,” said Marios Hadjikyriacos, investment analyst at XM, in a Tuesday note.

So far, 109 million Americans, or 32% of the population, have received at least one vaccine dose. In the last week, an average of 2.43 million doses per day were administered, according to CDC, Johns Hopkins and Bloomberg data.

“Even the risk of a more hawkish Fed tomorrow appears to have been discounted by market participants,” he said. “Since traders have already priced in an earlier timeline for rate increases, even if policy makers bring forward their rate forecasts to signal a hike in 2023 through the famous ‘dot plot’, that would still be aligned with market pricing and therefore not much of a shock.”

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The tech-heavy Nasdaq was recovering as U.S. Treasury yields slip. The recent backup in yields, which saw the rate on the 10-year note rise for six straight weeks, had weighed on the index as it sparked a rotation away from the most highflying stocks of the pandemic toward more cyclically sensitive stocks expected to gain from a wider economic reopening.

The Fed’s two-day meeting began Tuesday and when it concludes Wednesday, investors expect no changes in policy but will be eager to see updated projections on the economic outlook and the path for interest rates, while Chairman Jerome Powell’s news conference promises to me to be the key economic event of the week.

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“Higher growth and inflation expectations have pushed market participants to reprice the first Fed hike into late 2022. While we think that this is too early, what’s clear is that the trend in interest rates is higher,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.

U.S. investors have brushed off a sluggish European vaccine rollout, though officials have warned that it was premature to declare victory.

Key Words: ‘They thought that they were home free and they weren’t.’ Fauci says COVID-19 resurgence in Europe is a warning for the U.S.

Investors largely looked past data that showed U.S. retail sales fell 3% in February, with business expected to pick up in March and April as Americans spend $1,400 stimulus checks. Sales had soared a revised 7.6% in January after the government sent out $600 stimulus checks before President Trump left office.

“In some ways, the data is a bit irrelevant in the sense that the economy is going to be boosted by the new fiscal stimulus, and funds have already begun to be transferred,” said Marc Chandler, managing director at Bannockburn Global Forex, in a note.

Separately, the Fed reported that February industrial production fell 2.2%, which like retail sales was likely affected by harsh weather across much of the U.S., including Texas.

The National Association of Home Builders said its monthly confidence inex dropped two points to a reading of 82 in March, the lowest reading since August.

Which companies are in focus?

• Moderna Inc.
  MRNA,
  +7.45%
  on Tuesday said that it has dosed the first pediatric participants of its KidCOVE Phase 2/3 study of its COVID-19 vaccine candidate, which is being tested for children aged 6 months to less than 12 years. Moderna shares rose 9.5%.
• Nikola Corp.
  NKLA,
  -6.74%
  filed to sell $100 million worth of shares late Monday. Shares fell 6.3%.
• Ford Motor Co.
  F,
  -3.61%
  announced Tuesday plans to offer $2 billion in convertible senior notes due 2026, in a private placement to qualified institutional buyers. Ford shares were off 3.8%.
• Shares of Norwegian Cruise Line Holdings Ltd.
  NCLH,
  -3.33%
  fell 2.9% after the company said it was extending the suspension of its global cruise voyages by another month, through June 30.
• EToro Group Ltd., the social investment network and Robinhood rival, announced Tuesday that it would go public through a merger with special-purpose acquisition company, or SPAC, FinTech Acquisition Corp. V 
  FTCV,
  +27.37%
   in a deal that values eToro at about $9.6 billion. FinTech shares jumped 29%.
• Shares of GameStop Corp.
  GME,
  -8.36%
  were down more than nearly 16% after the popular meme stock dropped 11.1% on Monday. Shares of AMC Entertainment Holdings Inc.
  AMC,
  -8.73%,
  another popular holding, fell 9.2% after soaring 25.8% on Monday.

What are other markets doing?

• The yield on the 10-year Treasury note
  TMUBMUSD10Y,
  1.604%
  was flat at 1.609%
• The ICE U.S. Dollar Index
  DXY,
  +0.10%,
  a measure of the U.S. currency against a basket of six major rivals, was up 0.1%.
• Oil futures were lower, with the U.S. benchmark
  CL.1,
  -1.13%
  off 1.1% at $64.66 a barrel.
• Gold futures
  GC00,
  -0.01%
  edged higher, rising 0.1% to $1,727 an ounce.
• In Europe, the Stoxx 600
  SXXP,
  +0.88%
  rose 0.9% and London’s FTSE 100
  UKX,
  +0.80%
  advanced 0.7%.
• Asian equity markets logged gains, with the Shanghai Composite
  SHCOMP,
  +0.78%
  up 0.8%, while Hong Kong’s Hang Seng Index
  HSI,
  +0.67%
  gained 0.7% and Japan’s Nikkei 225
  NIK,
  +0.52%
  advanced 0.5%.