Stocks in the U.S. remain quiet, as uncertainty prevails prior to the Federal Reserve's decision on interest rate reduction
Nvidia took a dip in premarket trading, losing 1%, following a report that China's internet regulator has instructed the country's biggest tech companies to halt all purchases of Nvidia's AI chips. Despite this setback, Wall Street's main indexes have gained so far in September. The S&P 500 and the Nasdaq have hit record highs in the last six sessions, with the S&P 500 up 1 point, and the Nasdaq 100 E-minis up 0.75 points.
Dow E-minis, on the other hand, are up 22 points at 5.26am. This upward trend could be attributed to the revived enthusiasm around AI-stock-linked trading and rate-cut expectations, which have boosted the recent rally.
However, the upcoming Federal Reserve meeting may impact Wall Street's rally. Analysts at UBS Global Wealth Management expect Fed officials to push back against market expectations for a series of rate cuts extending into next year. The US central bank is expected to reduce borrowing costs by at least 25 basis points at 2pm. Market participants expect a rate reduction totaling about 68 bps by the end of the year.
The expected reduction is based on a series of economic indicators pointing to a weakening jobs market. The Fed meeting will be closely watched, with particular interest in chair Jerome Powell's speech and the "dot plot" projections to gauge the extent of interest-rate cuts this year and the next.
Meanwhile, New Fortress Energy soared 48% before the bell due to an agreement to supply liquefied natural gas to the Puerto Rican government. Workday gained 5.6% due to activist investor Elliott Management building a stake of over US$2 billion in the company.
Any hawkish element from Fed officials could challenge the currently positive investor sentiment and trigger market volatility. The Federal Reserve members most likely favoring a hawkish approach to interest rate hikes in 2021 and 2022 include officials like James Bullard and Robert Kaplan, with analysis institutions such as Goldman Sachs and JPMorgan supporting this view.
In conclusion, while the market has been on an upward trend, the upcoming Federal Reserve meeting could bring mixed signals and potentially impact the current rally. Investors will be closely watching the meeting for indications on interest rate cuts and the overall direction of the market.
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