U.S. Stocks Drift in Quiet Trading Ahead of Federal Reserve’s Next Meeting

Introduction

U.S. stocks drifted in quiet trading on Monday as Wall Street made few big moves overall in advance of the Federal Reserve’s next meeting on interest rates.

Stock Market Performance

• The S&P 500 edged up by 3.21 points, or 0.1%, to 4,453.53
• The Dow Jones Industrial Average rose 6.06, or less than 0.1%, to 34,624.30
• The Nasdaq composite added 1.90, or less than 0.1%, to 13,710.24

Uncertainty about Interest Rates

Stocks have been see-sawing since early August on uncertainty about whether the Fed is finally done with its drastic hikes to interest rates. Higher rates have helped cool inflation from its peak last summer, but they also hurt prices for stocks and other investments while slowing the economy.

Fed Meeting Expectations

Traders almost universally expect the Fed to keep rates steady at its meeting this week, which ends Wednesday. More attention will be on the forecasts Fed officials will publish about where they expect interest rates, the economy, and the job market to head in upcoming years.

Market Focus: Interest Rate Projections

One of the first things the market will fixate on is how high officials at the Fed see its main interest rate rising this year. Traders are betting on a roughly 40% chance the Fed will raise rates again in either November or December.

But just as much attention will be on what Fed officials say about next year when investors expect the Fed to begin cutting interest rates. Economists at Goldman Sachs expect Fed officials to indicate a full percentage point of cuts next year, after raising rates one more time this year.

Inflation and Oil Prices

Fears are strong that rates may have to stay higher for longer in order to get inflation fully down to the Fed’s 2% target. A recent upswell in oil prices has complicated things, with a barrel of U.S. crude rising to $91.48 on Monday.

Impact on Consumers and Treasury Yields

Higher prices for gasoline and other fuel were a big reason that inflation consumers are feeling accelerated last month. The rise in fuel prices, along with worries about rates staying higher for longer, have helped push up Treasury yields across the bond market.

The 10-year Treasury yield edged down to 4.31% from 4.33% late Friday. The two-year Treasury yield held steady at 5.04%.

Recession Concerns

Worries about a possible recession continue to hang around, even though successive reports show the economy and job market continue to hum. One worrying factor is where bond yields are, with two-year and other shorter-term yields continuing to remain higher than longer-term yields. Another warning signal comes from the leading economic indicators index.

Stock Market Updates

On Wall Street, Clorox dropped 2.4% after a cybersecurity attack caused disruptions to its business. Ford and General Motors were falling as a limited strike by the United Auto Workers carried into another day. Stocks of energy producers, meanwhile, helped to lead the market because of the rise in oil.

Global Market Performance

In stock markets abroad, the Hang Seng index in Hong Kong fell 1.4% following reports over the weekend that police had detained staff at the wealth management business of troubled real estate developer China Evergrande. Indexes fell across much of the rest of Asia, as well as in Europe.

Conclusion

Overall, the stock market is awaiting the Federal Reserve’s next meeting on interest rates, with traders expecting rates to remain steady. Concerns about inflation, oil prices, and the possibility of a recession continue to impact market performance.

Disclaimer: This article is for informational purposes only and should not be considered as financial advice. The stock market is subject to risks, and investors should do their own research before making any investment decisions.

AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

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