Wall Street: Low spreads pending the Fed


(CercleFinance.com) – Wall Street opened Wednesday’s session on an uneven note and limited spreads, as investors were careful not to overcommit themselves ahead of the highly anticipated Fed decisions.

At the very start of the session, the Dow Jones fell just 0.1% to 32,525.2 points, while the Nasdaq Composite fell less than 0.2% to 11,834.5 points.

The two indices seem to want to mark time after two consecutive sessions of gains, which saw them recover around 2%, carried by the rather reassuring evolution of the global banking system.

Following this recovery since the start of the week, the markets are opting for a more stable approach before preparing to take a position one way or the other following the Federal Reserve’s announcements.

The US central bank will announce its monetary policy decision throughout the afternoon and it will most likely involve raising its interest rates by a quarter of a percentage point.

Beyond the rate verdict, investors will be curious to hear what the institution has to say about the risks associated with the recent banking crisis and its impact on the economy.

‘The situation seems quite clear at this stage: the confidence shock induced by banking stress should itself ‘accomplish’ part of the work done so far by central banks, in particular by tightening the conditions for access to credit’ , explains Alexandre Baradez, at IG France.

‘Which should impact demand and therefore mechanically lower the pressure on prices’, adds the strategist who notes that the risk of a recession in the second half of the year in the United States has increased.

Investors will also be on the lookout for any clue informing them of the likelihood of upcoming increases by watching the ‘dots’, or the forecasts of Fed officials on the evolution of interest rates.

While waiting for the Fed, Treasury yields continue to rise, with bond market participants taking it for granted that rates will be raised.

The 10-year yield is hovering around 3.61%, far from the lows since the end of 2022 hit last week.

The dollar weakened against the euro, around 1.0775, affected by the increasingly serious worries that seem to be causing the growth of the American economy.

While waiting for the announcements from the Fed, investors will be attentive to the publication of weekly oil inventories, a prospect expected here again calmly by investors since the barrel of American light crude oil is currently unchanged at 69.6 dollars.

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