Wall Street experienced a slowdown on Tuesday as investors adopted a risk-off approach in anticipation of the U.S. Federal Reserve’s two-day monetary policy meeting. All three major indexes declined due to a broad sell-off ahead of the Fed’s announcement on Wednesday. Stocks of large companies sensitive to interest rates, such as Amazon.com and Nvidia Corp, contributed to the Nasdaq’s decline. Market participants adjusted their positions in anticipation of the central bank’s decision to maintain key interest rates.
According to Michael Green, the chief strategist at Simplify Asset Management, there has been an increase in hedging activity that is currently affecting the market. He stated, “What’s being priced into the market is a pause but increased risk that rates will stay higher for longer.” The Fed’s release of its Summary Economic Projections is expected to provide insight into the committee’s forecast trajectory of interest rates, inflation, and economic growth.
Financial markets have already factored in a 99% probability that the central bank will keep its key interest rate unchanged on Wednesday. Additionally, there is a 70.9% likelihood that the rates will remain unchanged at the next meeting in November, according to CME’s FedWatch tool.
Uncertainty among investors was further fueled by a rise in Canada’s annual inflation rate due to increasing gasoline prices and a larger-than-expected decline in U.S. housing starts. However, the IPO market showed signs of activity with the debut of grocery delivery app Instacart’s parent company, Maplebear Inc, on the Nasdaq. Maplebear shares surged 27.9%.
In terms of stock performance, consumer discretionary and technology sectors of the S&P 500 experienced the largest percentage declines. Walt Disney’s shares dropped by 3.0% after announcing an increase in capital expenditure for its parks business over the next decade. Starbucks also saw a decline of 2.1% following a downgrade by TD Cowen. On the other hand, automakers General Motors and Ford Motor Co gained 2.2% each as the United Auto Workers union threatened more strikes if progress was not made in ongoing talks.
Overall, declining issues outnumbered advancing ones on both the NYSE and Nasdaq. The S&P 500 recorded new highs and lows, while the Nasdaq Composite had a higher number of new highs and new lows.
Source: Not Provided.