Stocks Rise Ahead of Final Fed Decision of the Year
December 19 2018 - 10:27AM
Dow Jones News
By Riva Gold
-- Dollar extends declines ahead of Fed meeting
-- Italian stocks, bonds rally on budget deficit compromise
-- Crude oil stabilizes
U.S. stocks inched higher Wednesday ahead of a Federal Reserve
decision that is expected to set the tone for interest rates in
2019.
The Dow Jones Industrial Average climbed 131 points, or 0.6%, to
23815 in morning trading. The S&P 500 added 0.8%, after the
benchmark index closed little changed Tuesday when a steep fall in
oil prices dragged down shares of energy companies. The tech-heavy
Nasdaq Composite was up 0.96%.
All three benchmarks are down more than 10% for the quarter and
more than 7% in December alone.
The Fed is slated to release its interest-rate decision,
statement and projections from its December meeting later
Wednesday, marking one of the last major scheduled events for
investors to monitor in 2018.
The outcome of the meeting and the Fed's assessment of the
economy will be critical for investor sentiment, analysts say.
Weakness in rate-sensitive areas of the economy including the
housing and auto sectors has stoked fears that tighter financial
conditions could further slow the U.S. economy.
Yet signals that the Fed might be less gradual with its approach
next year have made some investors worry that growth is cooling
more quickly than anticipated, buffeting stocks in recent
weeks.
"You need to see some calming words, in terms of downgrading
[the Fed's]] view on the economy and emphasizing the path forward
is data-dependent," said Patrick Spencer, vice chairman of equities
at Baird.
With sentiment around markets so negative, "you could see a
relief bounce out of this depending on how [Chair Powell] moderates
his language," he added.
The strength of the labor market and broader U.S. economy is
expected to keep the central bank on course to raise rates at
Wednesday's meeting for the fourth time this year, though lingering
uncertainty about inflation and trade tensions has muddled the
Fed's path moving forward.
President Trump has consistently criticized the central bank for
boosting rates, and some analysts are worried that higher borrowing
costs will threaten corporate profitability moving forward.
This year, "it really wasn't trade that caused the big pullbacks
in the stock market, it was more worries about the Fed," said
Jeffrey Kleintop, chief global investment strategist at Charles
Schwab.
Mr. Kleintop pointed to February's stock-market selloff driven
by rising wage growth and inflation jitters, as well as Chairman
Jerome Powell's statement in October that he believed the U.S.
economy was "a long way from neutral", referring to the point at
which interest rates are neither spurring nor slowing economic
growth.
Stocks rallied last month when Mr. Powell appeared to walk back
those comments but have since tumbled anew with analysts anxious
about slower-than-expected growth.
The yield on the benchmark 10-year U.S. Treasury note fell to
2.814% Wednesday, according to Tradeweb, from 2.825%. Bond yields
fall as prices rise and have slid lately since touching their
highest level since May 2011 earlier this fall. The WSJ Dollar
Index, which tracks the U.S. currency against a basket of 16
others, was down 0.2%, dipping for a third consecutive session.
Analysts have been weighing how the Fed should proceed given
muted inflation and a recent tumble in oil prices. U.S. crude slid
another 7.3% Tuesday, bringing it nearly 40% below its peak from
early October. Prices were slightly higher Wednesday.
Investors say fears about slowing global growth amid trade
disruptions will likely continue to swing a range of stocks and
commodities moving forward. Negotiations between the U.S. and China
regarding their monthslong tariff fight are continuing, but some
companies have already reported tepid demand for their products and
services.
FedEx and chip maker Micron Technology each fell more than 6%
Wednesday after their quarterly results came in weaker than
expected.
"Global trade has slowed in recent months and leading indicators
point to ongoing deceleration," FedEx Chief Financial Officer Alan
Graf said in the company's earnings release.
Still, advances in other areas buoyed major indexes. General
Mills surged 9% after the food company topped earnings
expectations. And Pfizer shares climbed after the drugmaker and
GlaxoSmithKline said they would create a consumer health-care
giant.
Elsewhere, the Stoxx Europe 600 was up 0.3% in afternoon trading
as a budget-deficit agreement buoyed shares of Italian lenders,
while markets in Asia closed mixed.
Hong Kong's Hang Seng inched up 0.2%, while Japan's Nikkei Stock
Average fell 0.6% and stocks in Shanghai and Shenzhen fell over
1%.
Amrith Ramkumar contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
December 19, 2018 10:12 ET (15:12 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.