Stock Market Gains As Investors Anxiously Await Fed’s Rate Decision; Nasdaq Leads Indexes

The stock market gained Wednesday morning as investors anticipated a three-quarter-point rate hike at the Fed’s policy announcement later today. The Nasdaq led the major indexes.

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Stocks are rebounding from more than a week of heavy selling. The Nasdaq composite jumped 1.9% and the S&P 500 gained 1.1% Wednesday. The small-cap Russell 2000 gained 1.7%.

The Dow Jones Industrial Average was the laggard, only rising 0.6%.

Microsoft (MSFT) rose 1.9% in an attempt to rebound from a one-year low. Cisco (CSCO) and Salesforce (CRM) both gained more than 1.5%, as both stocks try to get back to their 50-day lines.

But the consumer discretionary sector led all S&P sectors. The Consumer Discretionary Select Sector SPDR ETF (XLY) gained 1.6%, led by Amazon.com (AMZN) and Tesla (TSLA). In spite of Tuesday’s 3.6% gain, Amazon is still trading at a low level it hasn’t hit since April 2020 and is still well below its 50-day line.

Volume was higher on the Nasdaq and lower on the NYSE compared with the same time on Tuesday. Advancing stocks led decliners by 3-to-1 on the Nasdaq and NYSE.

Stock Market Anxious For Fed Announcement

The Federal Reserve concludes its meeting today at 2 p.m. ET with a decision on interest rates. Most expect the Fed to lift the benchmark rate by three-quarters of a point, which would be the largest increase since 1994. As of Tuesday morning, financial markets were still pricing in 95% odds of a three-quarter-point rate hike, according to CME Group’s FedWatch page.

Futures markets indicated a half-point hike until Friday’s consumer inflation report changed the rate outlook. The stock market will be watching Fed Chairman Jerome Powell’s comments on the path forward on rates.

This morning, the U.S. Census Bureau reported that retail sales fell 0.3% in May. Excluding autos, May sales rose 0.7%. The measures missed the consensus Econoday estimates. Economists expected total sales to inch up 0.1% after rising 0.7% in April.

“The decline in retail sales, driven by a fall in auto sales, confirms our view that the average U.S. consumer is pivoting from spending on durable goods to more spending on services, especially travel-related services,” said Jeffrey Roach, chief economist for LPL Financial. “Nagging inflation and persistently high gas prices are taking a bite out of consumers’ wallets. We expect spending to further downshift during the latter half of this year.”

Energy Stocks Slip As Oil Prices Drop

The yield on the 10-year Treasury note fell 6 basis points to 3.41% after climbing higher the past three sessions.

Verra Mobility (VRRM) shares are up 1.7% and it has reset its base count by undercutting the low in its prior pattern. That makes the transportation data intelligence company’s current cup with handle a first-stage base. The buy point is 16.83.

While Verra’s 50-day moving average remains below its 200-day line, the stock has found support at its 200-day benchmark. Having posted average earnings growth of 73% over the last three quarters, Verra has found a spot on the IBD Breakout Stocks Index.

The Innovator IBD 50 ETF (FFTY) rose 0.3%, led by industrial stocks.

Most of the 11 S&P sector indexes were higher. The Energy Select Sector SPDR ETF (XLE) fell 1.3%. The price of U.S. crude declined 0.7% to $118.13 a barrel.

Follow Michael Molinski on Twitter @IMmolinski

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