Major Averages Remain Mixed As Fed Announcement Looms

Stocks showed a lack of direction early in the session on Wednesday and continued to turn in a lackluster performance in afternoon trading. While the Nasdaq and the S&P 500 have slid a little more firmly into the red, the narrower Dow is posting a modest gain.

Currently, the Dow is up 123.83 points or 0.3 percent at 37,939.75, but the Nasdaq is down 54.90 points or 0.4 percent at 15,602.95 and the S&P 500 is down 13.90 points or 0.3 percent at 5,021.79.

The choppy trading on Wall Street comes as traders seem reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement this afternoon.

While the Fed is widely expected to leave rates unchanged, traders will pay close to the wording of the accompanying statement along with Fed Chair Jerome Powell’s post-meeting press conference.

“Yesterday’s late selloff characterized a shift in the market’s mindset from hopes of monetary accommodation to acceptance that higher rates will persist,” said John Lynch, Chief Investment Officer for Comerica Wealth Management.

“Consequently, today’s big news will likely come from Treasury’s refunding announcement rather than the FOMC,” he added. “Any signs of increased liquidity should enable economic demand, and risk assets, to regain their footing.”

In U.S. economic news, payroll processor ADP released a report showing private sector employment increased by more than expected in the month of April.

ADP said private sector employment shot up by 192,000 jobs in April after jumping by an upwardly revised 208,000 jobs in March.

Economists had expected private sector employment to climb by 175,000 jobs compared to the addition of 184,000 jobs originally reported for the previous month.

“Hiring was broad-based in April,” said ADP chief economist Nela Richardson. “Only the information sector – telecommunications, media, and information technology – showed weakness, posting job losses and the smallest pace of pay gains since August 2021.”

Meanwhile, the Institute for Supply Management released a separate report showing a modest contraction by U.S. manufacturing activity in the month of April.

The ISM said its manufacturing PMI slipped to 49.2 in April from 50.3 in March, with a reading below 50 indicating contraction. Economists had expected the index to edge down to 50.0.

The slight pullback by the index came after it indicated a modest expansion in March following sixteen consecutive months of contraction.

Semiconductor stocks continue to see substantial weakness on the day, resulting in a 3.6 percent nosedive by the Philadelphia Semiconductor Index.

Advanced Micro Devices (AMD) has led the sector lower, plunging by 9.2 percent despite reporting slightly better than expected first quarter results. Traders may be disappointed AMD provided second quarter sales guidance in line with analyst estimates.

Significant weakness also remains visible among computer hardware stocks, as reflected by the 2.4 percent slump by the NYSE Arca Computer Hardware Index.

Shares of Super Micro Computer (SMCI) have plummeted by 15.2 percent after the high efficiency server maker reported weaker than expected fiscal third quarter revenues.

Energy and airline stocks are also seeing notable weakness, while utilities stocks have shown a strong move to the upside.

In overseas trading, Japanese and Australian stocks moved lower on Wednesday, with most markets in the Asia-Pacific region closed for Labor Day. Japan’s Nikkei 225 Index dipped by 0.3 percent, while Australia’s S&P/ASX 200 Index slumped by 1.2 percent.

While most of the major European markets were also closed on the day, U.K. stocks moved modestly lower. The U.K.’s FTSE 100 Index ended the day down by 0.3 percent.

In the bond market, treasuries are regaining ground after moving notably lower in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.9 basis points at 4.657 percent.