MW Dow, S&P 500 under pressure but Nasdaq near record as stock-market investors gear up for Fed update
By Joy Wiltermuth and Mark DeCambre
The Dow and S&P 500 lost ground Monday, while tech stocks edged the Nasdaq Composite toward an all-time high, as investors prepared for an important meeting of the Federal Reserve this week.
The rate-setting gathering could help investors assess how the central bank views evidence of surging inflation against data showing slack in the job market during the COVID pandemic recovery.
The Fed's two-day meeting commences Tuesday.
How is the stock market trading?
On Friday , the Dow retreated 0.8% for the week, snapping a 2-week win streak, but was off 0.86% from its May 7 record closing high at 34,777.76. The S&P 500 advanced 0.4% for the week to mark its 28th record close of 2021, the Nasdaq Composite Index ended the week with a 1.9% gain.
What's driving the market?
What once proved illusory for the Fed years ago may now be transitory, and now it is time to put talking about inflation on the agenda.
By the middle of the week, investors finally may have a clearer sense of the U.S. central bank's game plan for confronting inflation and normalizing policy, including whether Fed officials still deem pricing pressures temporary.
Read: Here's what the market wants--and doesn't want--to hear from Powell at this week's Fed meeting
"It's all about interest rates and any possible change in the language from the Federal Reserve," said Kent Engelke, chief economic strategist, Capitol Securities Management, of the mixed day for stocks.
Engelke also said many still expect the Fed to keep rates near zero and maintain its current pace of bond buying for some time, which may be helping lift technology stocks Monday, up 0.4%, as a component of the S&P 500 index.
Key Words:Paul Tudor Jones sees 'green light to bet heavily on every inflation trade' if Fed ignores price pressures Wednesday
The U.S. central bank is buying $80 billion of Treasurys and $40 billion of mortgage-backed securities each month, while keeping benchmark interest rates between 0% and 0.25%.
Federal Reserve Chairman Jerome Powell and fellow policy makers are expected to discuss the eventual tapering of that $120 billion a month asset-purchase program, which could prove delicate as they hope to avoid roiling the market in the process.
It is expected that the Fed's projections of interest rates in the future, the so-called dot-plot, may show a shift forward for the first rate increase to come during 2023. At the moment, the Fed shows no rate increases until 2024 at the earliest. Back in March, the Fed penciled in a 2.2% core rate for the personal consumption expenditure index.
While that may rise, the Fed won't move the core rate for 2022 much higher, a signal that it still believes the price gains seen in the past few months reflects "largely transitory" factors.
"Though inflation concerns appear to have moderated, we expect volatility to spike around further data indicating accelerating wage growth and/or prices," wrote Saira Malik, chief investment officer at Nuveen, in a note.
The Tell:Inflation scare? Check out this chart before freaking out
"Should price increases begin to spread beyond their current narrow scope, or if employers continue to hike pay to attract or retain workers, the Fed may feel the need to more openly discussing tapering," she wrote.
In Europe, U.K. Prime Minister Boris Johnson was expected to delay the full lifting of COVID restrictions due to a surge in new cases caused by the Delta variant as positive tests climbed to their highest since February. Leaders of the Group of Seven also championed a 15% global minimum tax rate support and continued fiscal stimulus to help economies dig out of the COVID pandemic.
-Joy Wiltermuth; 415-439-6400; AskNewswires@dowjones.com
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$(END)$ Dow Jones Newswires
June 14, 2021 17:48 ET (21:48 GMT)
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