Stocks Mixed Ahead of FOMC

STATE OF THE MARKETS

Stocks mixed ahead of FOMC. US stocks closed mixed on Tuesday as markets expect a 75 basis points hike ahead of FOMC on Wednesday. Nasdaq (+0.18%) managed to eke minor gains but Dow (-0.50%) and S&P (-0.38%), including Russell (-0.39%) closed in the red as cash demand continued to push the Dollar index near 105.65 mark. Bonds were sold off sending yields higher across the board with the 10Y benchmark piercing 3.50%

In the commodities market, Dollar strength sent major commodities lower with crude settled near $116.35/bl while gold is $5 away from the key level of $1800/oz. Elsewhere, iron ore continues to drag lower to $140/tn as markets weigh on demand from China re-opening.

In the FX space, demand for King Dollar remained in top spot across all horizons as Euro advanced further into demand territories alongside Yen and Loonie. Overall sentiments remain bearish as demand for Swiss remains elevated across the board.

On Wednesday, markets are expected to be volatile as a 75bps hike is now priced in and any bump of less would send the Dollar lower. Earnings releases to watch for includes John Wiley & Sons (WLY), Dynagas LNG (DLNG), Azure Power (AZRE), Capstone Green Energy (CGRN) and Educational Development Corp (EDUC) as well as the latest figures in US mortgage applications, wholesale inventories, retail sales and the much awaited FOMC meeting. The EIA petroleum status report will be in the spotlight for energy traders. 

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OUR PICK – No New Pick.

We stay on the sideline. With a 75bps hike already priced into the market, a 50bps hike will throw a very volatile session which could spell a rally in stocks and sell-off in the Dollar. In such a scenario, we would see rebound in commodity currencies and metals as well but would not enter unless on pullback.

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