Wall Street Hesitates Ahead of Fed Decision Amid Oil Slump
The US stock rally that had previously brought indexes near record highs began to stall on Tuesday (June 16th), ahead of the Federal Reserve's first interest rate decision under Kevin Warsh. Weakening oil prices further pressured bond yields, while the market assessed the latest impact of easing geopolitical tensions.
The S&P 500 held limited movement after earlier rallying on expectations of the reopening of the Strait of Hormuz. At 9:32 a.m. New York time, the S&P 500 was virtually unchanged, the Nasdaq 100 fell 0.3%, while the Dow Jones Industrial Average rose 0.7%.
Brent briefly fell below $80 per barrel after the agreement to reopen the Strait of Hormuz raised hopes for a supply recovery. The oil decline eased inflation concerns on the energy side and pushed bond yields lower, creating support for riskier assets, although the index's momentum began to limit.
The market now awaits the direction of central bank communications to assess how the war and falling energy prices will factor into policy projections. Most central banks in developed countries, including the Fed, are expected to remain unchanged on interest rates this week, while the Bank of Japan is the exception, with a widely anticipated rate hike expected.
In the stock market, attention is also focused on SpaceX after its recent rally, which has seen Elon Musk's rocket company potentially surpass Amazon as the world's fifth-largest public company after a major IPO. This movement has buoyed interest in the technology and growth sectors, although the Nasdaq remained weak in early trading.
The main transmission for the market lies in the relationship between energy, inflation, yields, and stock valuations. Lower oil prices could ease inflationary pressures, lower expectations of prolonged high interest rates, and help yields move lower. However, these positive effects are not enough to push the index further before the Fed's signal becomes clearer.
The next focus will be on the Fed's statement, the response of bond yields, the direction of oil prices following the US-Iran deal, and the continuation of the rotation in large technology stocks. As long as the market does not receive firmer policy guidance, the US index has the potential to remain selectively moving near high levels. (arl)
Source: Newsmaker.id
