Stocks Push Higher Ahead of FOMC Meeting Results

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up +0.64%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.61%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.45%. 

Stocks this morning are moderately higher on short-covering ahead of the results this afternoon of the 2-day FOMC meeting.  The markets will also scour post-meeting comments from Fed Chair Powell for clues into how long the Fed plans to aggressively tighten monetary policy. Market expectations are for the FOMC to raise the fed funds target range today by +75 bp for the third consecutive meeting. 

U.S. defense stocks are climbing today after Russian President Putin vowed to step up his war against Ukraine.  Also, chip stocks are moving higher today to lead gainers in technology stocks.  In addition, General Mills is up more than +5% after it boosted its 2023 organic net sales forecast.

Today’s -2.5 bp drop in the 10-year T-note yield to 3.538% is another supportive factor for stocks.  The dollar index rose to a new 20-year high today on safe-haven buying from the escalation of the war in Ukraine. 

This morning’s U.S. housing news was bullish for stocks after Aug existing home sales fell -0.4% to 4.80 million, stronger than expectations of a larger decline to 4.70 million.

Today’s stock movers…

General Mills (GIS) is up more than +5% today to lead gainers in the S&P 500 after it boosted its 2023 organic net sales forecast to up 6%-7% from a previous estimate of up 4%-5%, stronger than the consensus of up 5.68%.   

U.S. defense stocks are climbing today after Russian President Putin declared a “partial mobilization” of 300,000 Russian reservists in an escalation of the war in Ukraine.  Northrop Grumman (NOC) and Huntington Ingalls Industries (HII) are up more than +3%, and Lockheed Martin (LMT) and Raytheon (RTX) are up more than +2%. 

Chip stocks are moving higher today to lead gainers in technology stocks.  Qualcomm (QCOM), Marvel Technology (MRVL), and Microchip Technology (MCHP) are up more than +2%.  Also, Align Technology (ALGN), Texas Instruments (TXN), NXP Semiconductors (NXPI), Applied Materials (AMAT), and Micron Technology (MU) are up more than +1%.

Arista Networks (ANET) is up more than +3% today after Barclays upgraded the stock to overweight from equal weight.

Walmart (WMT) is up more than +2% today to lead gainers in the Dow Jones Industrials after CEO Furman said “there’s a lot of customer demand still in the market” as he announced that Walmart plans to hire 40,000 seasonal workers for the holiday season this year.

Cruise line operators are falling today, with Royal Caribbean Cruises (RCL) down more than -5% to lead losers in the S&P 500 after Truist Securities cut its price target on the stock to $58 from $65.  Carnival (CCL) is also down more than -5% and Norwegian Cruise Line Holdings (NCLH) is down more than -3%.  

Hotel and travel stocks are under pressure today to weigh on the overall market.  Las Vegas Sands (LVS), Expedia Group (EXPE), and United Airlines Holdings (UAL) are down more than -4%.  Also, Wynn Resorts (WYNN), Delta Air Lines (DAL), and Hilton Worldwide Holdings (HLT) are down more than -3%.  In addition, MGM Resorts International (MGM), Booking Holdings (BKG), and Host Hotels & Resorts (HST) are down more than -2% 

U.S.-listed Chinese stocks are moving lower today amid tensions between China and Taiwan.  Pinduoduo (PDD) is down more than -5% to lead losers in the Nasdaq 100. Also, NetEase (NTES) is down more than -4%, and JD.com (JD) and Baidu (BIDU) are down more than -3%.

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up +5 ticks, and the 10-year T-note yield is down -2.5 bp at 3.538%. Dec T-notes this morning are moderately higher after comments from Russian President Putin sparked short-covering in T-notes.  Putin today ordered a partial mobilization of Russian reservists, threatening to escalate the war in Ukraine.  Further gains in T-note prices may be limited until the market digests the results of the FOMC meeting later this afternoon and comments from Fed Chair Powell.  The markets have fully priced a +75 bp rate hike for today’s FOMC meeting.

The dollar index (DXY00) this morning is up +0.47% and climbed to a new 20-year high.  Ramped up geopolitical risks in Europe have boosted safe-haven demand for the dollar today and undercut the euro after Russian President Putin ordered a “a partial mobilization” of Russian troops in an escalation of his war against Ukraine. The dollar also has support on expectations for th Fed today to boost the fed funds target range by 75 bp.

EUR/USD (^EURUSD) today is down -0.70% and dropped to a 2-week low. The euro retreated today on Russia’s escalation of the war in Ukraine after Russian President Putin ordered a “partial mobilization” of 300,000 Russian reservists.  Putin also pledged to annex the territories his forces have already occupied and vowed to use all means necessary to defend Russia.  EUR/USDs also took a hit today after Deutsche Bank said the Eurozone will face a deeper recession than previously forecast.   

ECB Vice President Guindos said despite data pointing to a "substantial" slowdown in growth across the Eurozone, risks to prices remain skewed to the upside.

Deutsche Bank said the Eurozone will face a deeper recession then previously forecast after Russia halted nat-gas deliveries through the Nord Stream 1 pipeline.  As a result, Eurozone 2023 GDP will contract -2.2% annualized, compared with a July projection of -0.3%.

USD/JPY (^USDJPY) today is up +0.17%.  The yen is modestly lower today after the BOJ unexpectedly boosted QE. In an attempt to keep the 10-year JGB bond yield from moving above its 0.25% upper target, the BOJ today announced unscheduled bond purchases and said it plans to buy 150 billion yen of 5-10 year bonds and 100 billion yen of 10-25 year bonds.  Lower T-note yields today are limiting losses in the yen. 

October gold (GCV2) is up +9.7 (+0.58%), and December silver (SIZ22) is up +0.302 (+1.57%).  Precious metals this morning are moderately higher, with silver posting a 1-week high.  An escalation of geopolitical risks in Europe has sparked safe-haven buying of precious metals after Russian President Putin today ordered a “partial mobilization” of 300,000 Russian reservists as he ramps up his war in Ukraine.  Gains in gold were limited today after the dollar index climbed to a new 20-year high. Also, expectations for the Fed today to boost interest rate by 75 bp later today is undercutting metals prices.  Finally, fund liquidation of gold is another bearish factor as long positions in gold ETF’s dropped to an 8-month low Tuesday.

• Markets Today: Stocks Moderately Higher Ahead of FOMC Decision
• Pre-Market Brief: Stocks Mixed Ahead of Fed Rate Decision
• Unusual Options Activity For September 20th
• CMEGroup's Eurodollar Futures to Become Three-Month SOFR Futures