Wall Street faced a downturn on Tuesday as cautious sentiment prevailed ahead of the Federal Reserve’s critical two-day monetary policy meeting. The three major indexes experienced a broad decline, a trend expected to persist until the Fed’s interest rate decision on Wednesday, which is anticipated to maintain current rates.
Bill Northey, Senior Investment Director at U.S. Bank Wealth Management, emphasized the market’s keen interest in the Federal Reserve’s stance on inflation. He noted that while inflation had shown progress over the past year, the final stretch towards the Fed’s 2% target might pose challenges.
The Fed is set to release its Summary Economic Projections, including the dot plot, offering insights into the Federal Open Markets Committee’s outlook on interest rates, inflation, and economic growth.
Michael Green, Chief Strategist at Simplify Asset Management, highlighted the market’s anticipation of a rate pause, albeit with heightened concerns of sustained elevated rates. A shift in the dot plot indicating no rate cuts in 2024 could be viewed as a hawkish stance.
Market analysts have priced in a near-certain 99% probability of the Fed maintaining the key Fed funds target rate at 5.25%-5.00% on Wednesday. Looking ahead, there is a growing 70.9% likelihood of a similar stance in the upcoming November meeting, according to CME’s FedWatch tool.
Economic indicators added to investor uncertainty, including Canada’s rise in annual inflation due to increased gasoline prices and a larger-than-anticipated drop in U.S. housing starts.
The IPO market saw activity with Instacart’s parent company, Maplebear Inc., making its Nasdaq debut, following Arm Holdings’ recent successful entry. Maplebear shares surged 12.3%, while Arm Holdings experienced a 4.9% decline.
The Dow Jones Industrial Average fell by 106.57 points, or 0.31%, closing at 34,517.73. Similarly, the S&P 500 dropped by 9.58 points, or 0.22%, finishing at 4,443.95. The Nasdaq Composite recorded a decrease of 32.05 points, or 0.23%, ending at 13,678.19.
Within the S&P 500’s 11 major sectors, nine concluded the session in the red, with energy and consumer discretionary experiencing the most significant declines.
Walt Disney shares declined following an announcement of nearly doubling capital expenditure for its parks division over the next decade. Starbucks also faced a dip after TD Cowen downgraded the company’s shares to “underperform.”
Automakers General Motors and Ford Motor Co advanced, coinciding with the United Auto Workers union’s plans for potential strikes if negotiations with automakers do not progress.
Declining issues surpassed advancing ones on the NYSE, with a ratio of 1.67-to-1; on Nasdaq, decliners held a ratio of 1.47-to-1.
The S&P 500 observed seven new 52-week highs and nine new lows, while the Nasdaq Composite reported 33 new highs and 257 new lows.
Trade volume on U.S. exchanges totaled 9.60 billion shares, slightly below the 10.05 billion average over the last 20 trading days.