S&P 500 ekes out a narrow gain as the Fed pauses rate hikes

Stocks gyrated on Wednesday as the Federal Reserve paused its rate-hiking campaign and signalled it was making progress on fighting inflation.

As traders were expecting, the Fed kept interest rates unchanged at a target range of 5 per cent-5.25 per cent on Wednesday afternoon, ending a streak of 10 consecutive hikes.

Earlier Wednesday, May’s producer price index, an indicator of the path of inflation, fell 0.3 per cent, a larger decrease than expected. On Tuesday, May’s reading of the consumer price index, which showed the lowest annual increase in more than two years, bolstered investor hopes that the Fed was winning its war against inflation.

Despite the pause, the markets’ initial reaction was negative as investors focused on the central bank’s projections for the rest of the year, which indicated the Fed would restart rate hikes before long.

However, the sell-off stabilised somewhat as Fed Chair Jerome Powell said at his press conference Wednesday afternoon that the central bank hadn’t yet made a decision about July’s meeting. He also said the Fed was making progress against inflation.

The Fed next meets July 25-26. The central bank indicated it would hike another two times later this year.

The S&P 500 eked out a narrow gain, rising 0.08 per cent to close at 4,372.59. The Nasdaq Composite added 0.39 per cent to close at 13,626.48, supported by gains in Nvidia and AMD. The Dow Jones Industrial Average dipped 0.68 per cent, or 232.79 points, to finish the session at 33,979.33, dragged down by losses in UnitedHealth.

During the session, both the S&P 500 and the Nasdaq touched their highest levels since April 2022.

In company news, Oracle shares grew 4.8 per cent to hit a record closing price. Over the past year, Oracle's stock has risen by an impressive 73 per cent, surpassing all other large-cap enterprise technology stocks except for Nvidia. In 2023 alone, the shares surged by over 50 per cent, making it the most profitable year for shareholders since the dot-com boom in 1999.

The EU parliament has approved sustainability regulations for the battery industry, but the decision on including nuclear production of ammonia in the renewables law is undecided.

Also, the European Commission proposed measures to improve sustainable finance. They include regulations to separate ESG rating businesses from other financial services. The German economy ministry presented a draft law on climate protection to other ministries, advancing efforts in that area.

Argentina's President and the EU chief signed an MoU to enhance cooperation on sustainable raw materials for clean energy transition. Argentina, a major lithium producer, is attracting investments and has potential in renewable energy. The MoU coincides with ongoing efforts to finalise a trade deal between the EU and Mercosur bloc, expected to conclude this year.

US-led group of 12 countries, along with the EU, plans to select key critical-minerals projects by year end to reduce China's dominance in green technology raw materials. The Mineral Security Partnership has shortlisted 15 projects from 200 options, according to Jose Fernandez, US under-secretary for economic growth, energy, and the environment.

The head of one of Britain’s few surviving homegrown battery manufacturers has threatened to build its planned new factory overseas unless the UK closes the gap with subsidies offered by the EU and US.

Alan Hollis, chief executive of AMTE Power, said the government must offer more financial support to become competitive as the UK lags behind in the global clean energy subsidy race. The EU has offered hundreds of billions of euros in response to the US administration providing $370bn of incentives through the Inflation Reduction Act.

The sterling has risen to its highest level against the dollar since April 2022, boosted by strong economic data that has added pressure on the Bank of England to keep raising interest rates.

The pound climbed as much as 0.8 per cent on Wednesday to $1.2698, helped by a broad retreat for the dollar as markets expected the US Federal Reserve to pause its tightening.

Overall, US sectors closed mostly lower. Information Technology was the best performer, whilst healthcare was the worst.

Futures

The SPI futures are pointing to a 0.3 per cent gain.

Currency

One Australian dollar at 7:15 AM was buying 67.99 US cents.

Commodities

Iron ore futures are pointing to a 1.67 per cent gain.

Gold lost 0.17 per cent. Silver added 0.75 per cent. Copper gained 0.72 and oil fell 1.66 per cent.

Figures around the globe

Across the Atlantic, European markets closed higher. London’s FTSE added 0.10 per cent, Frankfurt gained 0.49 per cent while Paris closed 0.52 per cent higher.

In Asian markets, Tokyo’s Nikkei gained 1.47 per cent, Hong Kong’s Hang Seng was dwon 0.58 per cent while China’s Shanghai Composite closed 0.14 per cent lower.l

Yesterday, the Australian sharemarket closed 0.32 per cent higher at 7162.

Ex-dividends

Incitec Pivot (ASX:IPL) is paying 10 cents 60 per cent franked
Plato Inc Max (ASX:PL8) is paying 0.55 cents fully franked
WCM Global Growth (ASX:WQG) is paying 1.64 cents fully franked

Dividends payable

Dalrymple Bay Infrastructure (ASX:DBI)
ResMed Inc (ASX:RMD)
Waterco (ASX:WAT)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

Disclaimer

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