Home Markets Bulls Fuel Stock Rally Ahead of FOMC Announcement

Bulls Fuel Stock Rally Ahead of FOMC Announcement

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Last Updated: 4:00PM EST

Stock indices finished today’s trading session in the green ahead of tomorrow’s FOMC announcement, where the Federal Reserve is expected to hike interest rates by 0.25%. The Dow Jones Industrial Average (DJIA), the S&P 500 (SPX), and the Nasdaq 100 (NDX) gained 1.1%, 1.47%, and 1.59%, respectively.

The utilities sector (XLU) was the session’s laggard, as it gained 0.66%. Conversely, the materials sector (XLB) was the session’s leader, with a gain of 2.22%.

WTI crude oil gained today, although it currently hovers right below the $80 per barrel mark. Analysts believe that oil has found a floor and is likely to go up in 2023.

Meanwhile, bond yields decreased, as the U.S. 10-Year Treasury yield is now hovering around 3.52%. This represents a decrease of more than two basis points from the previous close.

Similar movements can be seen with the Two-Year yield, which is now at 4.2%. As a result, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -68 basis points.

Last Updated: 2:00 PM EST

Equity markets are in the green heading into the final two hours of today’s trading session. As of 2:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.7%, 0.9%, and 1.1%, respectively.

Earlier today, the United States Chicago Purchasing Managers Index was released by ISM-Chicago, which measures the economic health of the manufacturing sector in Chicago. An expansion is defined by a number that is greater than 50, whereas a reading that is lower is considered a contraction.

In January, the number came in at 44.3, which was lower than the expected 45 from forecasters and a decrease from last month’s report of 45.1. It’s worth noting that the Chicago PMI has been trending lower since its peak of 75.2 back in May 2021. In addition, this marks the fifth consecutive month that the manufacturing sector in Chicago has contracted.

Last updated: 12:00PM EST

Stocks are positive halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average (DJIA), the S&P 500 (SPX), and the Nasdaq 100 (NDX) are up 0.2%, 0.6%, and 0.9%, respectively.

On Tuesday, the Conference Board released its Consumer Confidence report, which, as the name suggests, measures the consumers’ confidence in the economy. This report is believed to be a leading indicator for spending patterns, as optimistic consumers are more likely to spend as opposed to pessimistic ones.

For January, consumer confidence came in at 107.1, which was lower than expectations of 109, and a slight decline from last month’s reading, which was also 109. Nevertheless, it’s worth noting that consumer confidence has been in an overall uptrend since its 2022 low of 95.3 in July. However, compared to January 2022, sentiment declined by 3.6% on a year-over-year basis.

Last updated: 9:48AM EST

Stocks rallied on Tuesday, and with the earnings season in full swing, some large companies reported calendar Q4 earnings today before the markets opened.

Automobile major General Motors (NYSE: GM) reported a Q4 earnings beat while oil giant ExxonMobil (XOM) also delivered better-than-expected results.

Fast food restaurant chain McDonald’s (MCD) while reporting an earnings beat admitted that inflationary pressures are likely to continue this year. Meanwhile, logistics giant UPS (UPS) reported Q4 earnings that beat estimates.

In other news, home property prices continued to slide as indicated by the S&P CoreLogic Case-Shiller Home Price Index in the month of November. This index declined for the fifth straight month, with the seasonally adjusted HPI Composite for 20 cities dropping 0.5% month-over-month in-line with consensus and the same as the prior month.

The Dow Jones Industrial Average (DJIA) was up 0.7% while the S&P 500 (SPX) climbed 0.3%, as of 9:48 a.m. EST, Tuesday. Meanwhile, the Nasdaq 100 (NDX) advanced 0.6%

Last updated:9:00 AM EST

Stock futures were up early Tuesday morning as the Fed prepares to commence the first day of the FOMC meeting. Investors are looking forward to the Fed’s interest rate decision that is to be announced on February 1.

Futures on the Dow Jones Industrial Average (DJIA) were up 0.17% while those on the S&P 500 (SPX) climbed 0.3%, as of 9:00 a.m. EST, Tuesday. Meanwhile, the Nasdaq 100 (NDX) futures climbed 0.2%.

The Fed is Likely to Make a Lower Interest Rate Hike Tomorrow

The two-day FOMC meeting is to begin today, January 31, and the Federal Reserve is likely to announce a 25 basis point interest rate hike on the final day of the meeting, that is, February 1. Fed leaders have reiterated several times that although a pivot is not likely in the vicinity, a slowdown in the pace of economic tightening can be expected.

The labor market is still strong and the Fed is likely to keep squeezing it till unemployment rises to around 5% (from the current 3.5%). Desirable wage deflation is expected around this level of unemployment, and once that is achieved, investors will finally see the chances of a pivot rising.

IMF Raises Global GDP Forecasts

Meanwhile, the latest forecasts from the International Monetary Fund (IMF) gave investors a ray of hope that the U.S. still has a narrow chance of avoiding a recession despite unemployment increasing to about 5.2% by 2024.

The global GDP is expected to expand by 2.9% this year, 0.2 percentage points higher than October’s forecast. The reopening of China’s economy, the remarkably resilient U.S. labor market, and softening energy crisis in Europe drove IMF’s optimism. Global expansion is expected to further climb to 3.1% in 2024.

Earnings Season Rages on

This week also holds several key corporate earnings. McDonald’s (NYSE:MCD) and General Motors (NYSE:GM) reported better than expected results before the bell. Meanwhile, Meta (NASDAQ:META) is scheduled for February 1 whereas Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOGL) are up for February 2.

All eyes will be on the outlook provided by the companies to better understand how the coming few months stand to look like.

Asia-Pacific Remains in the Red

Asia-Pacific markets were predominantly in the red on Tuesday as several economic data, as well as the anticipation of another interest rate hike in the U.S., kept investors.

Hong Kong’s Hang Seng index dropped 1.75% while Mainland China’s Shanghai Composite and Shenzhen Component dipped 0.42% and 0.8%, respectively. The losses came despite China’s manufacturing Purchasing Manager’s Index (PMI) showing that the country swung back to productivity in January.

Japan’s Nikkei 225 and Topix lost 0.39% and 0.36%, respectively, following the news of the nation’s unemployment rate remaining flat at 2.5% for December.

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