Stocks were mixed-to-down ahead of the Federal Reserve’s address to the market at 2:30 p.m. E.T. Wednesday.
The Dow Jones Industrial Average fell 0.5%, while the S&P 500 was largely flat. The tech-heavy Nasdaq rose 0.67%. The safe 10-Year Treasury bond saw its yield slip to 0.8% from 0.82%. It had reached as high as 0.91% in June, as economic bullishness has taken hold.
The Fed will speak this afternoon. There isn’t much more it can do on the stimulus front and stimulus is almost fully priced into the financial market, but investors need to hear that liquidity will still pump through the system for the foreseeable future.
"The continuation of price trends in airline and cruise shares, the Australian dollar, crude oil and other growth-sensitive assets could be disrupted by what the Fed does and says,” wrote Jasper Lawler, head of research at London Capital Group in emailed remarks to reporters. “The only risk is that the bond yield spike continues unabated — and potentially dents the recovery with higher borrowing costs for firms and the US government, which have been borrowing heavily.”
Most expect the Fed to use the tool of forward guidance, potentially calming investors by reminding of the low interest rate policy the central bank has adopted.
Cyclical sectors failed to lead markets, as sectors like banking, consumer discretionary and oil fell considerably. They’d had a strong run of late. Tech, which had recently take a breather, lead. The NYSE FANG index rose more than 1% and Apple (AAPL) hit new all-time high of $350, up 1.85%.
Apple’s already-strong services business may have received a tailwind from the stay-at-home coronavirus environment, according to Morgan Stanley analysts. Plus, its China hardware sales, roughly 20% of revenue, are expected to rebound as China gets back to work.
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