Wall Street’s main indexes have climbed after a sell-off in the previous session, with investors assessing the latest economic data ahead of the outcome of a Federal Reserve policy meeting later in the day.
Major US stock indexes dropped more than 1.0 per cent on Tuesday as regional bank shares tumbled on renewed fears over the financial system and as investors tried to gauge how much longer the Fed may need to hike interest rates.
PacWest Bancorp and Western Alliance Bank on Wednesday rebounded from previous session’s steep falls and rose 11.6 per cent and 6.5 per cent respectively while the KBW Regional Banking index advanced 2.3 per cent.
“There’s a reasonable belief that some regional banks could be exposed to similar circumstances (the recent bank failures) given rising rates and that we’re heading right into a Fed meeting in which they’re continuing to raise,” Jason Pride, chief of investment strategy and research at Glenmede, said.
While the Fed is widely expected to deliver a 25-basis point interest rate hike, investor focus will be on cues if further hikes are on the cards given inflation remains above the US central bank’s 2.0 per cent target level.
“The Fed may want to deliver as little in the way of guidance as possible, keeping the door open for a pause or even an additional hike,” Saxo Bank analysts said.
Major global central banks have embarked on an aggressive interest rate hike campaign to tackle sticky inflation, with the Fed already having hiked its benchmark rates nine times by 475 basis points to a range of 4.75 per cent-5.00 per cent since March 2022.
ADP National Employment’s report showed US private employers boosted hiring in April but there were signs that the labour market was slowing amid higher interest rates.
The US services sector maintained a steady pace of growth in April but higher input prices indicated inflation could remain elevated for some time.
In early trading on Wednesday, the Dow Jones Industrial Average was up 34.45 points, or 0.10 per cent, at 33,718.98, the S&P 500 was up 11.76 points, or 0.29 per cent, at 4,131.34, and the Nasdaq Composite was up 48.15 points, or 0.40 per cent, at 12,128.66.
Analysts expect quarterly earnings for S&P 500 companies to decline 1.4 per cent from a year earlier, according to IBES data from Refinitiv, compared with a 5.1 per cent drop expected at the start of April.
Eli Lilly and Co gained 4.3 per cent and hit a record high as the company’s experimental Alzheimer’s drug slowed cognitive decline by 35 per cent in a closely watched late-stage trial, helping healthcare shares top sector indexes.
Advanced Micro Devices slumped 8.4 per cent after the chipmaker forecast quarterly sales below estimates due to a weak PC market, pushing rival Intel Corp up 3.1 per cent.
Estee Lauder Cos Inc slid 21.3 per cent as the MAC lipstick maker forecast a bigger drop in full-year sales and profit.
Advancing issues outnumbered decliners for a 2.11-to-1 ratio on the NYSE and a 2.25-to-1 ratio on the Nasdaq.
The S&P index recorded 19 new 52-week highs and two new lows while the Nasdaq recorded 30 new highs and 76 new lows.