Market Update: Stocks Steady as Fed Interest-Rate Decision Looms

U.S. stocks traded mostly higher on Tuesday, though gains were limited as traders shifted their focus to the Federal Reserve’s most important meeting of the year.

Stocks Settle Mostly Higher

The large-cap S&P 500 Index reported a gain of 0.2% to close at 2,786.85, its highest settlement in over three months. Six of 11 primary sectors finished in positive territory, led by a 1.2% gain in utilities stocks. Shares of consumer discretionary and technology firms rose 0.5% on average.

A positive performance in technology sent the Nasdaq Composite Index to new record highs. The tech-driven average gained 0.6% to 7,703.79.

Dow industrials pared losses in the final hour of trading to close at 25,320.73, virtually unchanged from Monday.

The CBOE Volatility Index, also known as the VIX, traded within a narrow range and eventually settled slightly lower at 12.31. The so-called “fear index” continues to hover well below its historic mean.

Fed Meeting Underway

Federal Open Market Committee (FOMC) members arrived in Washington Tuesday to begin two-day policy deliberations.

The central bank’s policy-setting board is widely expected to lift interest rates by 25 basis points Wednesday afternoon, the second of three planned rate hikes this year. Investors will monitor the language of the Fed’s official statement to determine if a fourth rate hike is possible for 2018.

Inflationary trends suggest that the Fed could move quicker to normalize monetary policy. On Tuesday, the Labor Department said annual consumer inflation rose 2.8% for May, the biggest increase in more than six years. Fed policymakers target annual inflation at 2% but rely on the more conservative core personal consumption expenditure (PCE) index for guidance.

The Fed’s official policy statement will be accompanied by revised economic projections covering GDP, unemployment and inflation.

Trump-Kim Summit

U.S. President Donald Trump and North Korea’s Kim Jong-un held their first face-to-face meeting in Singapore on Tuesday, where both sides committed to peace-building in the region.

Speaking at a news conference after the historic meeting, Trump said Kim agreed to “complete denuclearization of the Korean Peninsula” in exchange for unspecified “security guarantees.”

Trump said he was pleasantly surprised by how well the first round of talks went, claiming both sides were “much further along” than initially expected.

Both leaders signed a document pledging to continue negotiations in support of “a lasting and stable peace regime.”

Featured image courtesy of Shutterstock. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi