S&P 500, Nasdaq, Dow edge higher in choppy session ahead of Fed decision

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Stocks managed to record modest gains following an uncertain session on Tuesday, as investors were reluctant to make large bets ahead of the highly anticipated Federal Reserve announcement due out the next day.

The S&P (SP500) finished +0.5%, the Nasdaq (COMP.IND) ended +0.2% and Dow (DJI) closed +0.2%.

Looking at the day’s closing numbers, the Nasdaq rose 27.74 points to finish at 12,563.76. The S&P 500 advanced 20.10 points to end at 4,175.48. The Dow recorded a final reading of 33,128.79 on the day, up 67.29 points.

Nine of 11 S&P sectors finished higher, with Energy and Financials leading the advance. Consumer Discretionary and Consumer Staples were the only two market segments to finish lower.

The megacaps mostly edged higher. Fundstrat’s Tom Lee laid out the argument that FAANG strength at the tail end of April shouldn’t be ignored.

Longer rates are falling back after the 10-year Treasury yield topped 3% yesterday for the first time since 2018. The market has priced in a 50-basis-point hike in the fed funds rate on Wednesday.

The 10-year was down 2 basis points to 2.98%. The 2-year yield was up 4 basis points to 2.77%.

Looking at the market as a whole, billionaire investor Paul Tudor Jones expressed skepticism about the current financial markets. Citing the uncertain Fed environment, he said investors shouldn’t own stocks or bonds.

Looking at economic data, the March JOLTs numbers came in hot, with openings and number of quits at the highest levels of the survey’s history.

“We are just shy of 2 vacancies for every unemployed worker,” Indeed economist Nick Bunker tweeted. “There were 1.9 openings per unemployed person in March. Quits rate is still well above pre-pandemic rate, but not surging like it was last year. Workers’ job security is still strong with the layoff rate just a bit above all-time lows.”

The labor market is showing few signs of cooling, which will only encourage a hawkish message from Fed chief Jay Powell on Wednesday.

“Notwithstanding our expectation that the Fed hikes less than market expects over 2022 we do not see much room for dovishness in the May meeting,” Standard Chartered’s Steve Englander wrote. “It took a while for the FOMC to form a consensus and we don’t see an incentive for that consensus to break in H1.”

Among active stocks, IPG Photonics was among the biggest gainers in the S&P after earnings. Expedia was the big decliner as travel stocks tumbled on Hilton’s guidance.