U.S. stock benchmarks on Wednesday rose sharply, with investors fixated on the outcome of the Federal Reserve meeting, which concludes later in the session as well as on developments with the highly levered property developer China Evergrande.
How are stock-index futures trading?
The Dow Jones Industrial Average
climbed 414 points, or 1.2%, to 34,338.
The S&P 500 index
rose 45 points, or 1%, to 4,398.
The Nasdaq Composite Index
advanced 118 points, or 0.8%, to reach 14,865.
On Tuesday, the Dow fell 51 points, or 0.15%, to 33920, the S&P 500 declined 4 points, or 0.08%, to 4354, and the Nasdaq Composite gained 32 points, or 0.22%, to 14746. The Dow and S&P 500 marked a fourth straight day of losses, which was the worst stretch for the S&P 500 since mid-May.
What’s driving the market?
It is Fed day on Wall Street and the stock market is rallying, even as investor await the central bank’s updated policy statement at 2 p.m. Eastern, followed by a news conference with Fed Chairman Jerome Powell at 2:30 p.m.
Wall Street anticipates that the rate-setting Federal Open Market Committee will provide some guidance about the timing and pace of tapering its debt purchases, which provided much-needed liquidity to financial markets amid the worst of the COVID pandemic in 2020.
A number of analysts expect that an official announcement of the tapering of monthly purchases of $120 billion in Treasurys and mortgage-backed securities won’t come until November or December, with an eye toward concluding those purchases at in the middle of next year.
Beyond tapering talk, investors will pay attention to the outlook for policy interest rates, which currently stand in a range between 0% and 0.25%.
Meanwhile, worries about China’s indebted property company Evergrande subsided on Wednesday.
While Hong Kong markets were closed for a holiday, Frankfurt-listed shares of China Evergrande surged 50% after a unit of the company, Hengda Real Estate Group, pledged to make an on-time interest payment on Thursday. Separately, China’s central bank reportedly injected liquidity as markets reopened after a two-day holiday and talk of a restructure of Evergrande has eased some of the initial panic on Wall Street about financial contagion akin to what occurred in 2008 when U.S. investment bank Lehman Brothers failed.
However, investors remain wary as Evergrande itself still faces interest payments on bonds in coming days.
“While the markets are rebounding, we think its to soon to think the Evergrande situation will blow over without causing more near- term market pain,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
“That means this week’s meeting may be an appropriate moment for the Fed to give the market fair warning. Or not. In a sense it doesn’t matter much what they say or don’t say on tapering—the risk lies in what the Fed does or doesn’t say about rate hikes,” said Neil Wilson, chief market analyst at Markets.com.
Wilson said the central bank is also likely to look through softer economic data and stock market pullbacks seen recently.
Ahead of the Fed decision, investors parsed an August update on existing home sales which retreated as inventory and price remained major concerns for prospective buyers. Existing-home sales dropped 2% to a seasonally-adjusted, annual rate of 5.88 million in August, the National Association of Realtors said. Compared with August 2020, home sales were down 1.5%.
In Washington, the House voted late Tuesday to keep funding the government and avoid a shutdown, but faced opposition in the Senate given the Republican party’s opposition to raising the debt ceiling.
Which companies are in focus?
shares dropped over 8% after the shipping and logistics company lowered its outlook for the year, citing a tight labor market and higher expenses.
shares slipped 0.7% after U.K.-listed betting group Entain
said it was considering a new, improved takeover from the digital sports betting and entertainment group.
Stitch Fix Inc.
shares jumped 15% after the clothing-subscription company said it gained more clients and revenue rose 29% in the fourth quarter, driving more than $2 billion in annual sales for the first time.
How are other assets trading?
The yield on the 10-year Treasury note
retreated to around 1.32%. Yields and debt prices move in opposite directions.
The ICE U.S. Dollar Index
a measure of the currency against a basket of rivals was flat at 93.20.
Oil futures rose, with the U.S. benchmark
up 1.5% to $71.52 a barrel. Gold futures
fell less than 0.1% to $1,777.10 an ounce.
In Asia, Hong Kong was closed for a holiday, but reopening after a two-day break, China’s CSI 300
fell 0.7%. The Nikkei 225 index
Markets in Europe rose. The Stoxx Europe 600 index
rose 0.6% and London’s FTSE 100 index