U.S. stock market shows mixed reactions ahead of Federal Reserve's decision

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U.S. stock market shows mixed reactions ahead of Federal Reserve's decision
Credit: © Reuters.

The U.S. stock market exhibited a mixed trend on Wednesday, with investors waiting on the Federal Reserve's interest rate decision and remarks from Chair Powell. The S&P 500 rose by 0.3%, or 11 points, to reach 4,455, while the Dow Jones Industrial Average increased by 0.6%, or 200 points, to 34,717. Conversely, the Nasdaq Composite saw a slight decrease of less than 0.1%, or 12 points, settling at 13,667.

These changes follow Tuesday's performance where the Dow Jones fell by 0.31% to 34,518, the S&P 500 dipped by 0.22% to 4,444, and the Nasdaq dropped by 0.23% to 13,678.

Market trends are largely driven by traders' anticipation of the Federal Open Market Committee's policy decision scheduled for Wednesday afternoon. There is a high expectation that the Federal Reserve will maintain interest rates at a range of 5.25%-5.50%. However, there is a possibility of a rate hike to a range of 5.50%-5.75% at November's meeting, estimated at a likelihood of 29%.

Persistent inflationary pressures have been a concern due to the recent surge in U.S oil prices reaching a ten-month high and stronger-than-expected U.S economic data, potentially necessitating extended higher borrowing costs.

These rising oil prices may influence the Federal Reserve's stance in its September meeting. Crucial market news is expected from the Fed's "dot plot" forecast for policy interest rates and Chair Jerome Powell's press conference later in the day.

Before the FOMC meeting, 10-year U.S. Treasury yields reached a new cycle high, suggesting a possible hawkish direction. However, Treasury yields receded from multi-year highs on Wednesday; the 2-year Treasury yields fell by 5.1 basis points to 5.058% from Tuesday's 17-year peak of 5.109%, while the yield on the 10-year Treasury declined by 3.7 basis points to 4.329%.

In corporate news, Instacart's shares fell by 5.3% following an IPO that saw them rise by 12%. General Mills Inc (NYSE: GIS ).'s shares also slightly declined by 0.3%, despite reporting first-quarter results that exceeded expectations and maintaining its full-year outlook. Coty (NYSE: COTY ) Inc.'s shares surged by 5.6% after the beauty giant elevated its fiscal 2024 guidance due to robust performance in its prestige fragrance business. Pinterest (NYSE: PINS ) Inc.'s shares increased by 4.3% as company executives projected an acceleration in revenue growth after a slowdown since 2022.

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