The major U.S. indices inched to new record highs on Tuesday, marking yet another victory for the stock market, which has been rallying for over a week. Investors have hit pause this morning, however, ahead of the latest FOMC policy directive, which will be released this afternoon at 14:00 ET. The S&P 500 futures currently trade just one point above fair value.
A rate hike is not on the table this afternoon, but the Fed is expected to announce a start date for its balance sheet normalization process. Investors are also eager to get their hands on the latest "dot plot," which shows the rate-hike projections of the FOMC members.
In addition, Fed Chair Janet Yellen will hold a press conference at 14:30 ET.
U.S. Treasuries are mostly higher ahead of the FOMC decision, bouncing back from over a week of weakness; the benchmark 10-yr yield is down one basis point at 2.23% while the 2-yr yield is flat at 1.39%. Meanwhile, the U.S. Dollar Index (91.48, -0.14) is down 0.2%, which places it at its lowest level in more than a week.
Crude oil has climbed 1.1% to $50.47/bbl, hitting a four-month high, after the Iraqi oil minister said that OPEC and non-OPEC producers are considering extending, or even deepening, last year's supply-cut agreement, which is currently set to expire in March 2018.
On the data front, today's most notable economic report--August Existing Home Sales (Briefing.com consensus 5.42 million)--will be released at 10:00 ET. The weekly MBA Mortgage Applications Index, which crossed the wires earlier this morning, decreased 9.7% to follow last week's 9.9% rise. Investors will not receive any other economic data.
In U.S. corporate news:
- Adobe Systems (ADBE 152.30, -4.30): -2.8% despite reporting better-than-expected earnings and revenues.
- FedEx (FDX 213.00, -3.00): -1.4% after issuing below-consensus guidance.
- General Mills (GIS 52.50, -2.88): -5.2% after reporting worse-than-expected earnings.
- Bed Bath & Beyond (BBBY 23.10, -3.93): -14.5% after missing both top and bottom line estimates and issuing below-consensus guidance.
- Western Digital (WDC 86.00, -3.92): -4.4% following reports that Toshiba (TOSBF 2.89, 0.00) may not select WDC in a bid for its chipmaking unit.
Reviewing overnight developments:
- Equity indices in the Asia-Pacific region ended Wednesday on a mixed, but generally quiet, note as participants awaited the latest policy update from the FOMC. Japan's Nikkei +0.1%, Hong Kong's Hang Seng +0.3%, China's Shanghai Composite +0.3%, India's Sensex unch.
- In economic data:
- Japan's August trade surplus JPY370 billion (expected surplus of JPY410 billion; last surplus of JPY360 billion). August Imports +15.2% year-over-year (expected 11.8%; last 16.3%) and August Exports +18.1% year-over-year (consensus 14.7%; prior 13.4%)
- New Zealand's Q2 Current Account deficit NZD7.49 billion year-over-year (expected deficit of NZD8.08 billion; last deficit of NZD8.13 billion)
- Australia's MI Leading Index -0.1% month-over-month (last 0.1%)
- In news:
- China Securities Journal said that the steady downtrend in the yuan is over and that two-way fluctuations are more likely going forward. This comes after more than a week of daily gains for the dollar against the Chinese currency, but the yuan is still up 5.3% against the dollar for the year.
- South Korea's President Moon Jae-in said that the warning President Trump delivered to North Korea, during yesterday's UN appearance, was firm and in-line with previous remarks.
- Major European indices trade near their flat lines while Spain's IBEX underperforms. France's CAC +0.2%, UK's FTSE unch, Germany's DAX -0.1%, Spain's IBEX -0.9%.
- In economic data:
- Germany's August PPI +0.2% month-over-month (expected 0.1%; last 0.2%); +2.6% year-over-year (consensus 2.5%; last 2.3%)
- UK's August Retail Sales +1.0% month-over-month (expected 0.2%; last 0.6%); +2.4% year-over-year (consensus 1.1%; last 1.4%). August Core Retail Sales +1.0% month-over-month (expected 0.2%; last 0.7%); +2.8% year-over-year (consensus 1.1%; last 1.4%)
- In news:
- Spanish equities could be starting to show stress due to the growing conflict between the country's federal government and officials in Catalonia. El Periodico reported that 14 arrests have been made in Catalonia today as Madrid steps up the frequency of raids aimed at halting the independence referendum planned for October 1. Catalan First Minister Carles Puigdemont has vowed to push on, saying the regional government "will not retreat."