The major stock benchmarks diverged on Tuesday, as traders pored through the latest batch of corporate earnings, while semiconductor names kept struggling.
The Dow Jones Up 0.7%, Nasdaq Slips Over 0.4%; Corning plunges more than 14%, while Micron drops over 6%. Coca-Cola climbs more than 3%.
A Federal Reserve rate decision is due Wednesday. Investors expect that the central bank will remain on hold, but will seek greater clarity on the path forward for monetary policy. Fed funds futures were last pricing in a quarter point hike in September, according to the CME FedWatch Tool.
“Our call is for no change,” Padhraic Garvey, regional head of research for the Americas at ING, said in a Tuesday morning note. “We see inflation expectations tame enough for comfort. Also, the structure of the curve does not shape up for a rate hiking cycle. Specifically, the 5yr is rich to the curve.”
“It’s unusual for the Fed to start a rate hiking cycle with the 5yr rich to the curve. If we’re wrong and the Fed does hike (whether at this meeting or the next), the curve structure suggests that any hikes delivered will be subsequently reversed, and the funds rate ends up lower than it is today within a 12-month window.”
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