US stocks hold steady as the countdown ticks to a Federal Reserve decision on interest rates

Globe and Mail

2 days ago

NEW YORK (AP) — U.S. stock indexes are drifting on Wednesday as Wall Street waits to hear from the Federal Reserve later in the afternoon about what it will do with interest rates.
The S&P 500 was edging up by 0.1% in early trading, coming off its first loss after setting all-time highs for six successive days. The Dow Jones Industrial Average was up 21 points, or less than 0.1%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was adding 0.3%.
The bond market saw a bit more action, where Treasury yields rose after a report suggested the U.S. economy's growth was much stronger during the spring than economists expected. It grew at a 3% annual rate, according to an advance estimate, a full percentage point more than forecast. But underlying trends beneath the surface may be more discouraging.
'Cutting through the noise of the swings in imports, the economy is still chugging along, but it is showing signs of sputtering,' said Brian Jacobsen, chief economist at Annex Wealth Management.
It reinforces the dilemma facing the Fed as officials prepare to vote on what to do with interest rates. They could lower rates, which would give the boost to the economy. That's what President Donald Trump has been angrily calling for. But lower rates could also give inflation more fuel when Trump's tariffs may be set to increase prices for U.S. households on their own.
Trump on Wednesday announced a 25% tariff on imports coming from India, along with an additional tax because of its purchases of Russian oil, beginning on Aug. 1. That's when stiff tariffs Trump has proposed for many other countries are also scheduled to kick in, unless they reach trade deals that lower the rates.
The widespread expectation on Wall Street is that the Fed will stay on hold with interest rates on Wednesday, as it's been doing so far this year following its cuts late last year. Fed Chair Jerome Powell has been insisting that he wants to see more data about how tariffs are affecting inflation and economy before the central bank makes its next move.
The yield on the two-year U.S. Treasury note rose to 3.91% from 3.86% late Tuesday. It tends to closely follow expectations for what the Fed will do with its overnight interest rate.
The 10-year Treasury, which also takes into account longer-term expectations for the economy and inflation, edged up to 4.36% from 4.34%.
On Wall Street, stocks were mixed as most big U.S. companies continue to report profits for the spring that were bigger than analysts expected.
Humana rose 4.9% after the insurer and health care giant reported stronger results for the spring than expected. It also raised its forecasts for profit and revenue over the full year.
Starbucks reported a weaker profit than analysts expected as it tries to turn around its fortunes. But its stock nevertheless rose 1.6% amid hopes that improved store operations and new products — including a cold foam protein drink — will boost its performance.
Companies are under pressure to deliver solid profit growth. They need to in order to justify the big jumps in their stock prices during recent months, which has caused some critics to say they look too expensive.
On the losing end of Wall Street was Old Dominion Freight Line. The trucking company dropped 6.2% after reporting profit and revenue that came in just short of expectations. CEO Marty Freeman said the results 'reflect the ongoing softness in the domestic economy' and that a tough operating environment 'has persisted for longer than anticipated.'
In stock markets abroad, indexes were mixed across Europe and Asia. Hong Kong's Hang Seng fell 1.4%, and South Korea's Kospi rose 0.7% for two of the bigger moves.