Market Snapshot: Stocks gain for a third session as investors parse retail sales data, await Fed update

Market Snapshot: Stocks gain for a third session as investors parse retail sales data, await Fed update

Stocks opened modestly higher Wednesday as investors parsed a reading on retail sales in August amid the COVID-19 pandemic and waited for a policy update from the Federal Reserve due later in the session.

How are equity benchmarks performing?

The Dow Jones Industrial Average DJIA, +0.41%   added 86 points, or 0.3%, opening near 28,082, while the S&P 500 index SPX, +0.36%   advanced 12 points to about 3,413, a rise of 0.4%. The Nasdaq Composite COMP, +0.18%   index gained 32 points, 0.3%, starting trade near 11,222.

On Tuesday, the Dow rose 2.27 points to finish at 27,995.60, while the S&P 500 gained 17.66 points, or 0.5%, to trade at 3,401.20, marking its third straight increase. The Nasdaq finished up 133.67 points, or 1.2%, at 11,190.32, logging back-to-back gains.

What’s driving the market?

Investors are awaiting the Fed’s first policy statement and updated economic projections under its new flexible inflation target strategy, which allows the central bank to let inflation run above 2% annually, and essentially calls for interest rates to remain lower for longer.

Market participants are watching to see how the central bank and Chairman Jerome Powell communicate the implementation of its new policy measures, announced last month.

See: Fed to signal interest-rate hikes won’t be an issue until 2024

The Federal Open Market Committee will release a policy statement at 2 p.m. Eastern on Wednesday. Powell will hold a press conference a half-hour later; and although no major changes to benchmark interest rates, which stand between 0% and 0.25%, are expected, market watchers will hope to glean more guidance from the Fed on the state of the economy and the expected pace of the recovery from the deadly pandemic.

Read:The Fed is ‘fighting the last battle,’ and here are the risks to its new strategy

The prospect of a prolonged period of support from the Fed has helped to bolster the U.S. stock market since its lows in March in the wake of the coronavirus pandemic, but investors are also weighing that support against further delays to another fiscal spending package expected from Congress.

A reading on retail sales in August just missed the MarketWatch consensus forecast, rising 0.6% for the month. Sales topped pre-crisis levels during the month, but the rate of growth is slowing.

Keith Lerner, chief market strategist for Truist/SunTrust Advisory Services, continues to expect Washington will pass another round of fiscal stimulus, especially as incoming economic data continues to show the impact of the expiration of the earlier benefits.

Stocks have remained resilient, Lerner pointed out in an interview, with consumer discretionary exchange-traded funds RCD, +0.45%   XLY, +0.04%  near all-time highs. He views the recent correction in stocks as healthy for an overstretched market but cautions that volatility and uncertainty will likely keep stocks in a “Two steps forward, one step back” pattern for the next few months.

Still, Lerner said, “Transportation, autos, materials, homebuilders, are all signs to us that the market is anticipating improvement in the economy over the next year. We think the market is right to think that.”

The OECD’s latest forecast for global growth published Wednesday shows the global recession may not be as bad as expected. The Paris-based organization said it now expects the world economy to shrink 4.5% this year, less than its June prediction for a 6% decline, reflecting a slowly improving U.S. labor market and China data.

Which stocks are in focus?

  • Shares of Southwest Airlines Co. LUV, +0.77%   edged down in early trading Wednesday, after the air carrier updated its financial guidance trends, including and upbeat outlook for load factor and reducing its third-quarter outlook for daily cash burn.

  • Unity Software Inc. on Wednesday raised the expected pricing of its initial public offering to $44 to $48 a share from $34 to $42 a share.

  • Facebook Inc. shares FB, -1.07%   were in focus after a report that the Federal Trade Commission is preparing to file an antitrust lawsuit against the social-media giant. Shares lost about 1% in early trade.

  • Shares of FedEx Corp. FDX, +7.61%  were 5% higher after the delivery and logistics company reported better-than-expected profit and sales for its fiscal 2021 first quarter, saying that its workers’ effort had kept “the world’s health care, industrial and at-home supply chains moving despite the challenges of the global pandemic.”

  • DraftKings Inc. DKNG, +8.20%   shares gained about 5% after the company announced it would be the exclusive online betting platform for the New York Giants.

  • Shares of Adobe Inc. ADBE, -1.72%   were lower after the bell after a price target increase, to $550, from JPMorgan.

  • Boeing Inc. BA, +0.21%   shares were lower after a congressional committee released a report blasting the company for failing to take action that would have saved lives, despite knowing about flaws in the design of its 737 Max jets.

Read:Forget value vs. growth. We’re in a quarantine vs. recovery paradigm now, this analyst says

How are other markets trading?

The yield on the 10-year Treasury note TMUBMUSD10Y, 0.669%   ticked down nearly 2 basis points to 0.663% as investors awaited the Fed decision. Bond prices move inversely to yields.

The ICE U.S. Dollar Index DXY, -0.11%, which tracks the performance of the greenback against its major rivals, was down 0.2% to 92.85.

Gold futures GCZ20, +0.30% rose 0.7% to $1,979.30 an ounce on the New York Mercantile Exchange. The U.S. crude oil benchmark CL.1, +2.69%   was 2.8% higher at $39.34 a barrel as investors continued to watch Hurricane Sally move toward the Gulf Coast.

Global equities were on the rise, with the Stoxx Europe 600 index SXXP, +0.04%   up 0.3%, while the U.K.’s benchmark FTSE 100 UKX, -0.59%   was unchanged. In Asia, Hong Kong’s Hang Seng Index HSI, -0.02%   closed fractionally lower and the Shanghai Composite SHCOMP, -0.35%   lost 0.4%. Japan’s Nikkei NIK, +0.08%  closed 0.1% higher.

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