Stocks were lower on Wednesday, ahead of the outcome of the two-day Federal Open Market Committee meeting.
Ahead of the Fed decision, the Dow Jones Industrial Average was down 168 points, or 0.5% and the S&P 500 fell 0.3%. The Nasdaq Composite was 0.1% lower. Tuesday, stocks slipped following data that showed a bigger-than-expected drop in retail sales for May, while the producer-price index excluding food and energy rose more than expected.
More data were released Wednesday. Housing starts for May came in at 1.57 million, under the estimate of 1.63 million. Building permits were 1.68 million, below the expected 1.73 million.
The data provide a fresh economic backdrop for the Federal Reserve decision, which investors will be watching closely for any sign the central bank is nearing a reduction in the size of its bond-purchasing program. If the central bank indicates the process will begin sooner rather than later, stocks could sell off.
“Regarding the tapering discussion, the key here is where the Fed admits the tapering discussion occurred,” writes Tom Essaye, founder of Sevens Report Research. “If it’s officially in the statement, that will be a hawkish shock to markets because that will mean the Fed expects to taper in the next few meetings.”
The Fed’s next move is anything but obvious. “There is a tremendous amount of uncertainty: how much of the inflation is being driven by transitory factors, like supply chain disruptions, and how much of the slower job growth is being driven by temporary measures like enhanced unemployment benefits,” Scott Ruesterholz, portfolio manager at Insight Investment, said.
Like others, Ruesterholz expects the Fed to “strike a patient tone, wanting to ensure they do not overreact and slow the pace of recovery.”
The Nikkei 225 index slipped 0.5% Wednesday, while China’s CSI 300 index lost 1.7%. Fresh data out of China showed signs of the country’s strong rebound from the Covid-19 pandemic starting to moderate, with industrial production and retail sales rising, but at a slower pace.
The European Stoxx 600 index was 0.2% higher.
The yield on the 10-year U.S. Treasury note was unchanged at 1.49%, while the U.S. dollar was also steady. Copper prices slipped, after China said it plans to release national metal reserves in a bid to cool a surge in commodities prices. That also hit shares of mining stocks in Europe, with shares of Anglo American (ticker: ALL), Rio Tinto (RIO), and Glencore (GLEN) weakening.
Oil prices hovered at two-year highs, with West Texas Intermediate crude up 0.7% to $72.64 and Brent crude rising nearly 0.8% to $74.55 a barrel. Investors are waiting on a weekly U.S. report from the Energy Information Administration that is expected to show a fourth straight weekly fall in domestic crude inventories.
Shares of Oracle (ORCL) were down 4.9% after the enterprise software company reported better-than-expected fiscal fourth-quarter results, but softer-than-anticipated guidance for the August quarter. The stock has rallied nearly 30% since mid-March, so investors may be compelled to take profits.
Dish Network (DISH) gained 2.9% after getting upgraded to Buy from Hold at Pivotal Research.
U.S. Steel (X) dropped 4.5% after getting assumed with Underweight from Neutral at JPMorgan.
General Motors (GM) rose 1.2% after it said it would increase spending on electric vehicles by 30% by 2025.
Write to Jacob Sonenshine at firstname.lastname@example.org