U.S. equities finished mixed on Tuesday as investors looked ahead to the conclusion of the Federal Reserve’s two-day policy meeting on Wednesday expected to feature the start of “quantitative tightening” — the process by which its bloated $4.4 trillion balance sheet will be rolled back.
The S&P 500 advanced 0.1% to 2506.65, a new all-time high, while the Dow Jones Industrial Average rose 39.45 points, or 0.2%, to 22,370.80, also a record. Yippee! The new highs came as the Fed began their two-day meeting at which it's expected to announce the start of its balance-sheet shrinking. NatWest Markets' Brian Daingerfield and team don't expect the Fed to "push the envelope." They explain: If we are right, we aren’t expecting tomorrow’s FOMC decision to really push the envelope further, in either direction, and at the end of the day the dynamic of the FOMC signaling gradual rate hikes while the market continues to price well below that possibility will remain in place.
Global stock markets inched higher on Tuesday and the dollar dipped as investors awaited signals from the U.S. Federal Reserve on when it will hike interest rates again and start shrinking its balance sheet. The Fed is widely expected to keep rates steady on Wednesday but announce that it will begin paring its bond holdings, with reductions likely to start in the coming months. Investors will be watching for signals that the Fed will raise rates in December, and for any clues on personnel changes as the end of Fed Chair Janet Yellen's term approaches and after the resignation of Vice Chair Stanley Fischer earlier this month.