Major Averages Posting Modest Gains In Morning Trading - US Commentary

WASHINGTON (Alliance News) - With traders looking ahead to the Federal Reserve's monetary ...

Alliance News 13 June, 2018 | 3:45PM
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WASHINGTON (Alliance News) - With traders looking ahead to the Federal Reserve's monetary policy announcement, stocks are seeing modest strength in morning trading on Wednesday. The gains on the day have lifted the tech-heavy Nasdaq to a new record intraday high.

Currently, the major averages are holding on to slim gains. The Dow is up 4.76 points or less than a tenth of a % at 25,325.49, the Nasdaq is up 22.69 points or 0.3% at 7,726.48 and the S&P 500 is up 1.74 points or 0.1% at 2,788.59.

Stocks are benefiting from recent upward momentum, although buying interest remains subdued ahead of ahead of the Fed's announcement.

The Fed is scheduled to announce its monetary policy decision at 2 pm ET, followed by Fed Chairman Jerome Powell's press conference at 2:30 pm ET.

While the Fed is widely expected to raise interest rates by a quarter point, traders are likely to pay close attention to the accompanying statement for clues about future rate hikes.

Likely reinforcing expectations for a rate hike, the Labor Department released a report before the start of trading showing a bigger than expected increase in producer prices in the month of May.

The Labor Department said its producer price index for final demand climbed by 0.5% in May after inching up by 0.1% in April. Economists had expected producer prices to rise by 0.3%.

Excluding food and energy prices, core producer prices rose by 0.3% in May after edging up by 0.2% in April. Core prices had been expected to show another 0.2% increase.

The report said the annual rate of producer price growth accelerated to 3.1% in May from 2.6% in April, reaching its highest level in over six years.

The annual rate of growth in core producer prices also ticked up to 2.6% in May from 2.5% in the previous month.

"The rebound in producer price inflation in May supports our view that core consumer price inflation will trend higher over the rest of this year," said Michael Pearce, Senior US Economist at Capital Economics.

He added, "That will keep the pressure on the Fed to keep raising interest rates once a quarter over the next year or so."

Most of the major sectors are showing only modest moves in morning trading, contributing to the relatively lackluster performance by the broader markets.

Housing stocks are seeing substantial weakness, however, with the Philadelphia Housing Sector Index slumping by 2%. The index is pulling back off its best closing level in almost two months.

The weakness among housing stocks may reflected concerns about the impact of higher interest rates ahead of this afternoon's Fed announcement.

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Wednesday. China's Shanghai Composite Index and Hong Kong's Hang Seng Index slumped by 1% and 1.2%, respectively. However, Japan's Nikkei 225 Index bucked the downtrend.

Meanwhile, the major European markets are seeing modest strength on the day. While the French CAC 40 Index is just above the unchanged line, the UK's FTSE 100 Index is up by 0.1% and the German DAX Index is up by 0.2%.

In the bond market, treasuries are showing a lack of direction as traders look ahead to the Fed decision. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 2.963%.

Copyright RTT News/dpa-AFX

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