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The stock market is seeing an afternoon fade Wednesday as investors wait for the Fed to kick off the rate tightening cycle.
The Nasdaq (COMP.IND) +1.8%, S&P (SP500) +1.1% and Dow (DJI) +0.7% are well off earlier highs.
Eight of 11 S&P sectors are still higher, with Consumer Discretionary and Financials at the top. Utilities is the weakest.
Stocks got a boost when the Financial Times reported that both sides are making progress on a 15-point plan that would see Russia withdraw and Ukraine accept neutrality and limits on its armed forces. But another report said Kyiv would not accept the neutrality demands.
Ukraine President Volodymyr Zelenskyy earlier appealed for more sanctions and a no-fly zone in a video address to Congress today.
Rates are steady ahead of what is expected to be a quarter-point hike from the FOMC. The 10-year Treasury yield is up 1 basis points to 2.17%.
“This is not the pandemic, where there was only one feasible policy path,” UBS chief economist Paul Donovan said. “The Fed has two contradictory policy options with higher commodity prices.”
“If the Fed worries about a wage-cost/price spiral, it will need to push growth below trend. Recession risks then rise substantially. If the Fed worries about demand shifts slowing growth and raising unemployment, it will tighten more cautiously.”
On the data front, February retail sales rose a little less than expected.
“The headlines look disappointing but the upward revisions – headline and non-auto sales were revised up by 1.0%, with the control measure up +1.5% – were bigger than the shortfalls against the February consensus forecasts,” Ian Shepherdson at Pantheon Macro said.
“Stepping back from the noise, the first quarter is now on course for a near-12% annualized increase in the control measure – assuming no revisions to the February numbers and unchanged m/m sales in March – a bigger increase than we previously expected,” he added. “In Q3 and Q4 last year, control sales rose by 2.8% and 6.2%, respectively, so this is a clear acceleration. It probably cannot be sustained, but in the meantime you should expect to see upward revisions to forecasts for Q1 GDP growth.”
Among active stocks, China-related issues are rallying after a central bank pledge to keep capital markets stable.