News Column

Stocks Showing A Lack Of Direction In Early Trading - US Commentary

June 18, 2014

WASHINGTON (Alliance News) - Stocks are showing a lack of direction in early trading on Wednesday, as traders look ahead to the Federal Reserve's monetary policy announcement. The major averages are lingering near the unchanged line after closing higher for three straight sessions.

Currently, the major averages are turning in a mixed performance. While the S&P 500 is up 0.80 points or less than a tenth of a %, the Dow is down 11.88 points or 0.1% at 16,796.61 and the Nasdaq is down 6.66 points or 0.2% at 4,330.58.

The choppy trading on Wall Street comes as traders seem reluctant to make any significant moves ahead of the announcement from the Fed, which is scheduled to be released at about 2 pm ET.

While the Fed is likely to leave interest rates unchanged, the central bank is widely expected to announce another USD10 billion reduction in the pace of asset purchases to USD35 billion per month.

The impact to the markets is more likely to stem from the language of the accompanying statement as well as any changes to the outlook for the economy and interest rates.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "The bottom line with the Fed today is to what extent they alter their predictions and acknowledge that things are happening at a faster pace than they previously estimated."

"If members predicted the first rate hike in the middle of 2015 under previous assumptions, what will they think today under new ones? Their credibility is on the line if they ignore that the facts are now different," he added.

Not long after the announcement, Fed Chair Janet Yellen is scheduled to hold a press conference to discuss the decision.

Yellen may be more cautious than during her first post-meeting press conference, when she triggered a sell-off on Wall Street by suggesting that interest rates might be raised sooner than anticipated.

Most of the major sectors are showing only modest move in early trading, contributing to the lackluster performance by the broader markets.

Utilities and transportation stocks are seeing some strength, while modest weakness is visible among housing and semiconductor stocks.

Among individual stocks, shares of Adobe Systems (ADBE) are moving sharply higher in early trading after the software developer reported better than expected second quarter results.

Delivery giant FedEx (FDX) is also seeing early strength after reporting fourth quarter earnings that exceeded estimates. The company also said it is well positioned for a strong fiscal 2015.

On the other hand, shares of Endocyte (ECYT) have come under pressure after the biopharmaceutical company said a Merck (MRK) subsidiary decided that it will no longer pursue development of its cancer drug vintafolide.

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance on Wednesday. Japan'sNikkei 225 Index advanced by 0.9%, while China's Shanghai Composite Index fell to by 0.5%.

The major European markets have also turned mixed on the day. While the French CAC 40 Index has edged down by 0.1%, the German DAX Index and the UK'sFTSE 100 Index are up by 0.2% and 0.3%, respectively.

In the bond market, treasuries are seeing modest strength after moving notably lower over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.2 basis points at 2.633%.

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Source: Alliance News

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