SINGAPORE (Reuters) – Major Wall Street indices were struggling for direction on Wednesday as US Treasury yields fell as traders await a rate hike by the US Federal Reserve and its view on the future path of interest rates.
Oil futures sold off sharply after falling as much as 5% on Tuesday as investors worried about the health of the economy ahead of the Federal Reserve’s statement and press conference by Chairman Jerome Powell on Wednesday afternoon.
While the dollar index fell, long-term US Treasury yields drifted lower while short-term yields rose, as investors positioned themselves ahead of the end of the Federal Open Market Committee (FOMC) meeting.
Most traders are betting that Powell will announce a 25 basis point rate hike but investors are waiting for reassurance that the central bank will stop walking around after today.
Stocks in US banks steadied after being hit on Tuesday and triggered a sell-off in the broader market on concerns that the failure of a third major US bank over the weekend may not be the end of the banking crisis.
While the major indexes opened slightly higher on Wednesday, they lost some ground in the late morning.
“It could be a very different day once we hear from Jerome Powell,” said Alex Coffey, chief trading analyst at TD Ameritrade, who sees investors mostly focusing on Powell’s comment.
“We haven’t been really surprised when it comes to the fed funds rate for some time. It will depend on the guidance going forward,” he said.
Besides clues about the rate hike path, investors will also listen carefully to Powell’s view on the US banking industry, according to Covey.
This week they should also watch earnings reports and wait for Friday’s US jobs report and what it might reveal about the economy.
Wall Street also keeps a wary eye on the US debt ceiling, as lawmakers squabble and Treasury Secretary Janet Yellen warns of a possible June 1 fiscal deficit.
The Dow Jones Industrial Average fell 69.01 points, or 0.2%, to 33,615.52 points, the Standard & Poor’s 500 lost 4.03 points, or 0.10%, to 4,115.55 points, and the Nasdaq Composite Index increased 18.24 points, or 0.15%, to 12,098.74.
The pan-European STOXX 600 index (.STOXX) rose 0.29% and the MSCI worldwide stock index (.MIWD00000PUS) rose 0.12%.
The dollar fell ahead of the Federal Reserve’s statement that the bets it is making indicate a pause in the walking cycle, which could lead to a further drop in the dollar.
The dollar index fell 0.461%, with the euro rising 0.5% to $1.1054.
The Japanese yen strengthened 1.04% against the dollar at 135.13 per dollar, while the British pound last traded at $1.2539, up 0.60% on the day.
“There are all indications and all expectations that the Fed will hike today and then pause,” said Joseph Trevisani, senior analyst at FXStreet.com.
In US Treasuries, the benchmark 10-year note fell 6.4 basis points to 3.375%, from 3.439% late Tuesday.
The 30-year note was last down 6.4 basis points to 3.6681% from 3.732%, while the two-year note was down 4.5 basis points to 3.9346% from 3.98%.
In the energy sector, US crude recently fell 4.06% to $68.75 a barrel, and Brent crude reached $72.44, down 3.82%.
Gold maintained its gains from the previous session on Wednesday as economic uncertainty countered strong private payroll data, while investors took a stance in favor of the Federal Reserve.
Spot gold rose 0.3 percent to $2,022.10 an ounce. US gold futures rose 0.22% to $2018.70 an ounce.
Edited by Lincoln Feast
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