U.S. Stocks Seeing Modest Strength Ahead Of Fed Announcement

U.S. Stocks Seeing Modest Strength Ahead Of Fed Announcement

December 20, 2023

Extending the upward trend seen over the past several sessions, stocks have moved modestly higher during trading on Wednesday. With the uptick on the day, the major averages have once again reached their best intraday levels in well over a year.

Currently, the major averages are posting slim gains. The Dow is up 5.16 points or less than a tenth of a percent at 36,583.10, the Nasdaq is up 32.61 points or 0.2 percent at 14,566.00 and the S&P 500 is up 8.70 points or 0.2 percent at 4,652.40.

Stocks continue to benefit from optimism about the outlook for interest rates ahead of the Federal Reserve’s monetary policy announcement this afternoon.

With the Fed widely expected to leave interest rates unchanged, traders will look to the accompanying statement and projections for hints the central bank could be planning to pivot to cutting rates next year.

“The market remains steadfast in its belief that the Fed will cut rates as early as this spring, although the Fed may want to keep its options open if its campaign to quell inflation hasn’t completed the more difficult ‘last mile,'” said Quincy Krosby, Chief Global Strategist for LPL Financial.

She added, “The Fed statement in concert with the ‘dot plot,’ coupled with Powell’s comments, should offer markets more clarity and hopefully less confusion over the Fed’s path towards price stability.”

Potentially adding to the positive sentiment, the Labor Department released a report showing producer prices in the U.S. unexpectedly came in flat during the month of November.

The report said the producer price index for final demand was unchanged in November after falling by a revised 0.4 percent in October.

Economists had expected producer prices to inch up by 0.1 percent compared to the 0.5 percent drop originally reported for the previous month.

The Labor Department also said the annual rate of producer price growth slowed to 0.9 percent in November from 1.2 percent in October. Year-over-year growth was expected to slow to 1.0 percent.

Sector News

Most of the major sectors are showing only modest moves on the day, although biotechnology stocks have moved sharply higher.

Reflecting the strength in the sector, the NYSE Arca Biotechnology Index has surged by 2.3 percent to its best intraday level in almost three months.

Acadia Pharmaceuticals (ACAD) has led the sector higher, skyrocketing by 34.3 percent after winning a patent suit regarding its drug Nuplazid.

Interest rate-sensitive commercial real estate and utilities stocks are also seeing some strength ahead of the Fed’s monetary policy announcement.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index rose by 0.3 percent, while China’s Shanghai Composite Index slumped by 1.2 percent.

Meanwhile, European stocks are seeing modest strength on the day. While the U.K.’s FTSE 100 Index is up by 0.3 percent, the French CAC 40 Index and the German DAX Index are nearly unchanged.

In the bond market, treasuries have moved to the upside as traders look ahead to the Fed announcement. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 4.6 basis points at 4.160 percent.

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