US open: Stocks in the red ahead of Fed rate decision

dl wall street st new york city nyc nyse stock exchange ny dow jones nasdaq sp finance us usa united states of america — Wall StreetSharecast photo / Josh White

Wall Street stocks headed south at the open on Wednesday as traders prepped for the Federal Reserve's highly anticipated interest rate decision later in the day.

As of 1520 GMT, the Dow Jones Industrial Average was down 0.31% at 35,434.12, while the S&P 500 was 0.28% weaker at 4,621.18 and the Nasdaq Composite came out the gate 0.58% softer at 15,148.79.

The Dow opened 110.06 points lower on Wednesday, extending losses recorded in the previous session as market participants thumbed over last month's producer price index and concerns related to the Covid-19 omicron variant continued to weigh on sentiment.

Wednesday's primary focus will be the conclusion of the central bank's two-day policy meeting, with a rate decision and comments from Federal Reserve chairman Jerome Powell scheduled for 1900 GMT and 1930 GMT, respectively.

With inflation at an almost 40-year high, the Federal Reserve is expected to accelerate the tapering of its bond-buying programme, which was put in place early on in the Covid-19 pandemic in order to prop up the US economy, setting it up for a dramatic policy shift that will likely lead to an interest rate hike in 2022.

Also drawing an amount of investor attention, congressional Democrats passed a bill to raise the US debt ceiling, with the bill now making its way to Joe Biden for the president to sign - just narrowly coming in before the date Treasury Secretary Janet Yellen said the government's spending power would dry up.

The new Covid-19 omicron variant also weighed on sentiment yet again after the World Health Organization warned that the new strain was spreading faster than any previous one and was now most likely in the majority of countries.

On the macro front, mortgage applications fell 4% in the week ended 10 December, according to the Mortgage Bankers Association, a marked reversal when compared to the prior week's increase of 2%, principally due to a sharp decline in refinancing activity, though purchases were also seen easing a little.

On another note, Americans consumed with a little less abandon than expected last month, spending less on automobiles and parts and on electronics. According to the Department of Commerce, in seasonally adjusted terms, US retail sales volumes rose at a month-on-month pace of 0.3% in November to reach $639.83bn. Economists had pencilled-in an increase of 0.8%.

Elsewhere, the cost of goods purchased from overseas increased more quickly than expected during the previous month, chiefly as a result of dearer natural gas prices. According to the Department of Labor, US import prices increased at a month-on-month pace of 0.7%, undershooting economists' forecasts for a rise of 0.8%. However, the previous month's gain was marked up to show a jump of 1.5%, against a preliminary estimate for a 1.2% increase.

Turning to the Federal Reserve, manufacturing activity in the Federal Reserve Bank of New York's district picked up slightly at the end of the year, to the surprise of economists, as the so-called Empire State index edged up from a reading of 30.9 for November to 31.9 in December. Economists had forecast a decline to 25.0.

Still on data, business inventories increased 1.2% in October, ahead of estimates for a print of 1.1%, according to the Census Bureau, while the prior month was upwardly revised from 0.7% to 0.8%.

Lastly, the NAHB's December housing market index showed surprisingly strong housing demand in December, despite it being a historically slower season for housing. Builder sentiment in the single-family housing market rose one point to 84 in December, according to the National Association of Home Builders/Wells Fargo's housing market index - marking a fourth consecutive increase.

In the corporate space, Floridian home construction company Lennar will report earnings after the close.

Dow Jones - Risers

Cisco Systems Inc. (CSCO) $58.74 1.68%
Unitedhealth Group Inc. (UNH) $483.11 0.76%
Merck & Co. Inc. (MRK) $74.22 0.69%
Microsoft Corp. (MSFT) $329.83 0.45%
Salesforce.Com Inc. (CRM) $256.63 0.41%
International Business Machines Corporation (CDI) (IBM) $124.23 0.38%
Walmart Inc. (WMT) $145.48 0.37%
Amgen Inc. (AMGN) $214.40 0.31%
Verizon Communications Inc. (VZ) $50.81 0.31%
Coca-Cola Co. (KO) $57.92 0.21%