US open: Stocks bounce back ahead of Fed announcement
US stocks rose in early trade on Wednesday following two days of heavy losses as investors sifted through corporate news and encouraging economic data ahead of the Federal Reserve’s latest policy announcement.
At 1520, the Dow Jones Industrial Average was up 0.9% at 26,398.42, the S&P 500 was 0.5% firmer at 2,836.26 and the Nasdaq was up 0.6% to 7,444.57.
The Fed statement is due at 1900 GMT. Although the meeting itself isn’t expected to contain many surprises following the rate hike in December, it will be Janet Yellen’s last as Chair as she passes the baton to Jerome Powell.
Markets are currently pricing in more than 90% probability of another 25 basis point hike at the March meeting.
Oanda analyst Craig Erlam said: “The Fed monetary policy meeting will be the first of the new year and the last under the leadership of Janet Yellen, who will be replaced as Chair by Jerome Powell. Bearing that - and the fact that the central bank raised interest rates at the last meeting in December - in mind, we’re not expecting any changes today, but we may get some insight into whether the new tax reforms have altered the views of policy makers.
“Of course, in the absence of a press conference with the Fed Chair, we’ll have to rely on the accompanying statement to provide fresh insight, at least until the minutes are released in a few weeks. A slight change in the statement can get quite a reaction in the markets though so traders as ever will be looking for any signs that future rate hikes are under-priced, given the recent changes.”
On the corporate front, chip maker Advanced Micro Devices rallied following better-than-expected quarterly earnings late on Tuesday, while video game producer Electronic Arts surged as its quarterly revenue came in ahead of analysts’ forecasts.
Boeing was also a high riser on the back of solid quarterly earnings and an upbeat outlook, while Broadcom gained after a better-than-expected earnings outlook.
Cummins racked up healthy gains after agreeing to buy London-listed Johnson Matthey’s UK automotive battery systems business, which specialises in high-voltage automotive grade battery systems for electric and hybrid vehicles.
Housebuilder D.R. Horton was in the black after posting better-than-expected profit and revenue for the first quarter.
On the downside, Eli Lilly fell despite better-than-expected fourth-quarter earnings.
With the non-farm payrolls report due at the end of the week, all eyes were on the latest ADP employment report, which showed private sector employment in the US grew in January.
Employers added 234,000 jobs, beating expectations for a 185,000 increase. Meanwhile, private payrolls gains for December were revised down to 242,000 from 250,000.
Small businesses with fewer than 50 employees accounted for 58,000 of the jobs added to the economy, while medium-sized businesses with between 50 and 499 members of staff added 91,000 jobs and large businesses accounted for an extra 85,000.
The goods-producing sector added 22,000 jobs, while the services sector added 212,000.
Meanwhile, the Chicago purchasing managers’ index slipped less than expected in January. The PMI fell to 65.7 from a revised 67.8 in December, beating expectations for a reading of 64.1.
Elsewhere, data from the National Association of Realtors showed US pending home sales rose 0.5% in December to a reading of 110.1, marking their highest level since March and surpassing expectations of a 0.4% increase.