Dow clings to gains ahead of Fed policy decision - CNN

The Dow (INDU) clings to a modest 0.2%, or 45 point, gain, while the S&P 500 (SPX) and Nasdaq Composite (COMP) are both in the red. The S&P is little changed in negative territory, and the Nasdaq is down 0.1%. The market seems to be in wait-and-see mode.

Hopes for an impending interest rate cut rose earlier this month, when Powell said the central bank would act as appropriate in ensuring that the US economy will keep growing. The market took this to mean that an economy-boosting rate cut was imminent and stocks rallied, as lower interest rates are good for companies.

At today's meeting, the Fed is expected to signal that lower rates are coming. That's why Powell's press conference following the 2 pm ET policy statement will be so closely watched.

Investors expect that Powell will drop the word "patient" from the statement. Since January, the Fed has said it would be patient in terms of future policy action. But those days might be over.

If Powell meets market expectations Wednesday, stocks could climb higher once again.

The likelihood for a cut at the Fed's July meeting is at 84%, according to the CME FedWatch tool.

The market might have gotten ahead of itself, some analysts suggest.

"One of the most important developments this year has been the dovish pivot of almost all G10 central banks," wrote analysts at Bank of America Merrill Lynch in a note. "Up to an extent, data justifies it. However, the data does not seem to explain the market pricing of aggressive monetary policy loosening in G10 economies."

Perhaps there are risks that aren't reflected in the economic outlook yet, Bank of America's analysts noted. Or maybe the Fed's communication with the market so far this year is to blame.

In line with that, Powell could disappoint hopes for swift policy action today, which would likely push markets lower.

"Given that US unemployment is at a 50-year low, and earnings are outstripping inflation, the Fed might catch out some dealers, and deliver a more neutral update, and should that be the case, we might see stocks pullback from the recent highs," said David Madden, market analyst at CMC Markets.

Perhaps the central bank is looking for more economic data to show that the US economy is slowing and thus support a rate cut. That strategy would leave hopeful investors high and dry at least until the September policy meeting.

Either way, it could be a volatile day.

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https://www.cnn.com/2019/06/19/investing/dow-stock-market-today-fed/index.html

2019-06-19 15:26:00Z
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