Investors Anticipating Fed’s Two-Day Meeting’s Refreshing Rhetoric

Wall Street is coming off a week of rebound as the stock market's January recovery continued. The Nasdaq Composite gained 4.3% for the week, while the S&P 500 and Dow added 2.5% and 1.8%, respectively.

Today, S&P 500 futures fell 0.8% as of 3:30 p.m. CET, while Nasdaq Composite contracts 1.13% concurrently. The Dollar Spot Index, DXY, retreated, boosting most Group-of-10 currencies. Treasuries were on the back foot, mirroring declines in German and UK bond markets. Commoditywise, Brent crude is easing by 1% to $85.46/bbl, while gold (XAUUSD) is little changed, and Bitcoin (BTCUSD) has been trading sideways around the $23K mark.

There are several tests this week for this 2023 rally. A busy stretch of corporate earnings season includes reports from McDonald's (MCD) and General Motors GM) tomorrow followed by tech giants Apple (AAPL), Meta Platforms (META), Amazon (AMZN) and Google-Alphabet (GOOG, GOOGL) later in the week.

Meanwhile, the Federal Open Market Committee meets tomorrow and Wednesday, when the Fed is expected to hike rates by one-quarter of a percentage point. Investors will be looking for clues about how much higher the central bank will take rates in the fight against inflation. The two-day meeting will conclude with the central bank’s Federal Open Market Committee announcing its latest interest rate decision.

European markets are trading lower this European afternoon. The pan-European Stoxx 600 index remained down 0.5% as of now, with nearly all sectors in the red. Technology stocks led losses, down 2.2%. At the time of writing, both the German DAX and the French CAC 40 retreated 0.38%. At the same time, the British FTSE 100, conversely, is adding a minuscule 0.04%. The moves come ahead of policy meetings at the Federal Reserve, European Central Bank and Bank of England this week.

Chinese stock markets rose sharply earlier this morning as they resumed trade after the Lunar New Year holiday, while a commitment from the government to boost spending and support economic growth also aided sentiment. The Shanghai Shenzhen CSI 300 index rose 1.3%, while the Shanghai Composite index added 0.6%, with most sectors trading positively. Automobile and industrial stocks were the best performers in early trade, while energy stocks retreated.

Celestial Empire’s State media reports suggested that retail travel and spending are recovering sharply to near pre-pandemic levels, boding well for the Chinese economy. 2023's Lunar New Year celebrations were the first in three years to occur without any anti-COVID restrictions, after the country began scaling back its strict zero-COVID policy in December.