U.S. stocks flipped between gains and losses on Monday as investors braced for a Federal Reserve meeting that’s expected to deliver another large interest-rate hike and shed further light on the Fed’s plans for monetary policy.
What’s happening
- The Dow Jones Industrial Average DJIA, +0.44% was down 45 points, or 0.1%, at 30,778, after falling 263 points at its session low.
- The S&P 500 SPX, +0.48% was off 4 points, or 0.1%, at 3,870.
- The Nasdaq Composite COMP, +0.57% was up 7 points, or 0.1%, at 11,454.
Last week, the Dow industrials fell 4.1% to end at 30,822.42, while the Nasdaq Composite saw a 5.5% weekly drop to 11,448.40. The S&P 500 finished Friday at 3,873.33 — falling 0.7% in the session and 4.8% for the week for its lowest close since July 18 and ending below important chart support at 3,900.
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What’s driving markets
Stocks searched for upward momentum on Monday following last week’s steep drop, while the market focus was firmly on this week’s two-day meeting of the Fed’s policy-setting Federal Open Market Committee, which is due to end Wednesday. A rate hike of three-quarters of a point is expected, and attention will be put on the accompanying dot plot of rate projections.
Equities pared losses and intermittently turned positive as Wall Street embraced Ralph Lauren Corp.’s RL, +2.67% outlook and found value in beaten up home builders and airlines, according to Edward Moya, senior market analyst for the Americas at Oanda Corp.
Shares of Ralph Lauren rose 2.3% after the company outlined its strategic growth plan in a statement and said it expects to return about $ 2 billion in excess cash flow to shareholders through fiscal 2025 in the form of dividends and share buybacks. It is also targeting a compound annual revenue growth rate over the next three years in the mid to high single digits.
“It looks like higher-income families are still in a good position to handle the next wave of price increases,” Moya said via phone.
Even so, there’s been “a growing amount of pessimism and diminished appetite for all risk assets,” he said. “We are not going to have extreme positioning ahead of the Fed’s decision, and that’s why trading will be volatile for the next 48 hours.”
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Stocks felt heat as Treasury yields continued their rise, with the policy-sensitive 2-year rate TMUBMUSD02Y, 3.940% heading closer to 4%, a level that some say could send shivers throughout the financial market. The last time the 2-year yield ended the New York trading session at 4% or higher was on Oct. 16, 2007, when it closed at 4.127%. Rising yields make bonds look more attractive relative to stocks.
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The U.K. stock market was closed in observance of the funeral of Queen Elizabeth II in London, attended by heads of state including U.S. President Joe Biden.
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Companies in focus
- Stocks of the three key vaccine makers fell Monday following Sunday’s “60 Minutes” interview with President Joe Biden, who said the pandemic is over. Shares of Moderna Inc. MRNA, -8.69% fell 9.2%. Pfizer Inc. PFE, -1.44% was down 1.8% and its German partner BioNTech SE BNTX, -8.99% dropped 8.7%.
- AutoZone Inc. AZO, -2.67% shares fell 2.5% even after the auto parts retailer reported fiscal fourth-quarter profit and sales that rose above expectations, helped by continued strength in its commercial business.
- German auto maker Volkswagen AG VOW, +3.34% is targeting a valuation of up to $ 71.5 billion (75 billion euros) for its initial public offering of Porsche, in what would be one of Europe’s largest-ever IPOs. Volkswagen’s board announced Sunday it intends to list shares between 76.50 and 82.50 euros, in the middle range of analysts’ expectations. Volkswagen’s U.S. common stock VLKPF, +3.19% rose 3.2%.
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— Steven Goldstein contributed to this article.