Equities Higher in Advance of Tomorrow’s Fed Decision…..

U.S. equities closed higher in another choppy session, as investors appeared cautious ahead of the Fed’s policy decision slated for tomorrow afternoon. The markets remained tense through the day, as expectations continued to build, that the Fed is likely to be aggressive in this monetary policy tightening cycle. Moreover, a handful of overarching themes continued to tamp down sentiment, including the ongoing war in Ukraine, the recent jump in interest rates, the rise in the U.S. dollar, and the economic impact of the Covid lockdowns in China. In economic news, factory orders rose nearly double expectations and the prior month was favorably revised to an increase, while the number of jobs available increased, with the number of workers quitting hitting a fresh all-time high. Meanwhile, earnings season remained in full force, as Pfizer posted a profit on increased Covid vaccine and treatment revenues, Expedia reported a loss that was mostly in line with expectations however offered an upbeat outlook, while Clorox bested forecasts but adjusted its guidance citing higher costs. Treasuries were mixed, and the U.S. dollar pared a recent rally, while crude oil prices were lower, and gold turned to the upside. Europe closed mostly higher after yesterday’s fall, with markets in the U.K. returning to action following yesterday’s holiday. Asia was mostly lower in lackluster volume with markets in China, Japan and India closed for holidays.

The Dow Jones Industrial Average rose 67 points (0.2%) to 33,129, the S&P 500 Index increased 20 points (0.5%) to 4,175, and the Nasdaq Composite advanced 28 points (0.2%) to 12,564. In heavy volume, 4.5 billion shares of NYSE-listed stocks were traded, and 4.5 billion shares changed hands on the Nasdaq. WTI crude oil lost $2.76 to $102.41 per barrel. Elsewhere, the gold spot price traded $7.00 higher to $1,870.60 per ounce, and the Dollar Index was 0.3% lower at 103.46.

Factory orders increased 2.2% month-over-month (m/m) in March, versus the Bloomberg estimate of a 1.2% rise, with the prior month’s 0.5% decrease being revised higher to a 0.1% increase. Durable goods orders—preliminarily reported two weeks ago—were revised favorably to a 1.1% advance for March, and excluding transportation, orders were upwardly adjusted to a 1.4% gain. Finally, nondefense capital goods orders excluding aircraft—considered a proxy for capital spending—was favorably-revised to a 1.3% increase.

The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, showed an increase to 11.55 million jobs available to be filled in March, from February’s upwardly-revised level of 11.34 million rate. The Bloomberg consensus estimate called for a 11.20 million level. The report showed the hiring rate remained at February’s 4.5% level, and separations increased to 4.2% from the prior month’s 4.0% pace. The quit rate ticked higher to 3.0% from February’s 2.9% pace—a new all-time high at 4.54 million positions.

Treasuries were mixed after yields have gained ground as of late, as the markets grapple with a host of headwinds and expectations that the Fed is set to get aggressive with monetary policy tightening. The Federal Open Market Committee has kicked off its two-day monetary policy meeting today, which will conclude tomorrow with its decision on the fed funds rate. Fed Chairman Jerome Powell has suggested a rate hike of 50 basis points (bps) is on the table, which would be the first time it raised rates in excess of 25 bps in over 20 years. Meanwhile the beginning of its balance sheet reduction program is also set to start soon, with a ramp-up to $95 billion in securities to “mature off” the balance sheet each month.

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