Dollar Surges as Fed Stays on Course for Rate Hike by Year-End

Virtually all activity in the markets, including the precious metals, will be governed by one fact on Wednesday: it’s Fed Day.

However, the so-called central tendency for those projections, which eliminates the three highest and lowest forecasts, was bumped down, from a range of between 1.1% to 1.6% to between 1.1% and 1.4%, with the latter roughly in line with market pricing of the odds of a hike at the time of the decision. The S&P 500 Index of shares in large USA companies is at a record high, and long-term interest rates have drifted lower over the year, despite the FOMC’s decisions to raise short-term rates in March and June. Raymond James Financial rose $1.15, or 1.4 percent, to $82.32.

With the unexpected decrease, existing home sales fell to their lowest annual rate since hitting 5.34 million last August. The Russell 2000 index of smaller-company stocks was up 3 points, or 0.3 percent, to 1,444. The Nasdaq slipped 5 points to 6,456.

The shift in rate expectations and resulting rise in yields was seen giving a lift to the dollar, with ICE dollar index, a measure of the US unit against a basket of six major rivals, up 0.8% at 92.571.

Four times a year, Federal Reserve policy makers at the Open Market Committee submit their projections about where short term interest rates are headed. Income-seeking investors find those stocks less appealing when bond yields move higher. Kellogg was off 82 cents, or 1.2 percent, to $65.05, while Campbell Soup lost 74 cents, or 1.6 percent, to $46.58. Bond yields rose, reflecting expectations of higher rates. “Banks will benefit from the steeper yield curve, and tech companies that have little debt will see a return on their cash increase as rates rise”. Share and bond prices are high.

KEEPING SCORE: The Standard & Poor’s 500 index was up less than 1 point to 2,507 as of 11:39 a.m.

NEW YORK, Sept 19 (Reuters) – Global stock markets edged higher on Tuesday and the dollar dipped as investors awaited signals from the U.S. Federal Reserve on when it will hike interest rates again and start shrinking its balance sheet. Johnson Controls rose 3 percent and American Airlines rose 2.3 percent. The pickup in oil prices helped lift energy stocks.

Technology stocks were down the most.

It also means that over time the extra money it created in the first place to buy the bonds will decline.

Brewer and distiller Diageo was at the other end of the blue-chip index, down 2.2%.

Stocks in NY were called for flat open on Wednesday, with the Dow Jones Industrial Average, the S&P 500 index and Nasdaq Composite all pointed flat ahead of the Fed’s interest rate decision and economic projections, which come after the London close but during NY market hours.

US crude fell 1.06 percent to $49.38 per barrel and Brent was last at $54.74, down 0.92 percent on the day. It has helped boost the political fortunes of President Donald Trump, who touted the US stock market Tuesday in a speech before the United Nations, saying “the stock market is at an all-time high, a record”.

It comes as the USA central bank announced that after almost a decade it would actually start to cut the size of its $4.5 trillion asset portfolio starting this October. Brent crude, used to price worldwide oils, was up $1.05, or 1.9 percent, to $56.19 a barrel in London. Treasury bonds were mostly weaker, the dollar strengthened, gold gained 0.4% and oil added 1.6% following mixed inventory data.

Bed Bath and Beyond plunged 17 percent after reporting earnings and sales that missed analysts’ forecasts. Futures for the Dow and S&P 500 were both flat. (NASDAQ:AAPL) fell 1.7% after Rosenblatt analysts highlighted weak iPhone 8 preorders relative to the iPhone 6 and iPhone 7 as iPhone X orders don’t start until October 27.