U.S. Stocks Continue To See Moderate Weakness Ahead Of Fed Announcement

After moving mostly lower early in the session, stocks continue to see moderate weakness in afternoon trading on Wednesday. While the Dow has been bouncing back and forth across the unchanged, the Nasdaq and S&P 500 have spent most of the day in negative territory.

Currently, the Nasdaq is down 64.74 points or 0.5 percent at 14,079.82, the S&P 500 is down 12.74 points or 0.3 percent at 4,554.72 and the Dow is down 18.20 points or 0.1 percent at 35,419.87.

The pullback on Wall Street comes as some traders look to cash in on recent strength in the markets ahead of the Federal Reserve’s monetary policy decision this afternoon.

Since the Fed is widely expected to raise interest rates by another 25 basis points, traders will be focused on the accompanying statement for clues about the outlook for interest rates.

Traders are optimistic the rate hike will be the last following recent encouraging inflation data, but the Fed may not offer as much confirmation as they hope.

“They will probably signal that they want to see the impact of the current tightening cycle and that they will probably skip raising rates in September,” Edward Moya, senior market analyst at OANDA, said of the Fed. “They will likely be clear in suggesting that more tightening could very well happen.”

A steep drop by shares of Microsoft (MSFT) is also weighing on the markets, with the software giant tumbling by 4.5 percent.

Microsoft has come under pressure after reporting better than expected fiscal fourth quarter results but providing disappointing revenue guidance for the current quarter.

Meanwhile, shares of Alphabet (GOOGL) have spiked by 5.8 percent after the Google parent reported second quarter earnings that exceeded analyst estimates.

Dow component Boeing (BA) has also soared by 6.7 percent after the aerospace giant reported a narrower than expected second quarter loss on revenues that beat expectations.

Sector News

Software stocks have moved sharply lower following the disappointing guidance from Microsoft, dragging the Dow Jones U.S. Software Index down by 3.2 percent.

Significant weakness also remains visible among semiconductor stocks, as reflected by the 1.8 percent slump by the Philadelphia Semiconductor Index.

Steel stocks are also seeing considerable weakness, with the NYSE Arca Steel Index falling by 1.3 percent after ending the previous session a four-month closing high.

On the other hand, transportation stocks have shown a substantial move to the upside, driving the Dow Jones Transportation Average up by 2.4 percent to its best intraday level in over a year.

Railroad operator Union Pacific (UNP) has spiked by 9.9 percent after announcing veteran rail executive Jim Vena has been appointed as chief executive officer.

Banking stocks are also turning in a strong performance on the day, resulting in a 1.5 percent advance by the KBW Bank Index.

Shares of PacWest Bancorp (PACW) are soaring by 25.3 percent after the regional bank agreed to a merger with Banc of California (BANC).

Under the terms of the merger agreement, PacWest stockholders will receive 0.6569 of a share of Banc of California common stock for each share of PacWest common stock.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan’s Nikkei 225 Index closed just below the unchanged line, while China’s Shanghai Composite Index fell by 0.3 percent.

The major European markets have also moved to the downside on the day. While the French CAC 40 Index has tumbled by 1.5 percent, the German DAX Index is down by 0.6 percent and the U.K.’s FTSE 100 Index is down by 0.4 percent.

In the bond market, treasuries are regaining ground after moving lower over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.5 basis points at 3.877 percent.

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