Dow up 200 points, but Nasdaq turns negative as investors await Fed update

On Tuesday, the Dow rose 2.27 points to finish at 27,995.60, while the S&P 500 gained 17.66 points, or 0.5%, to trade at 3,401.20, marking its third straight increase. The Nasdaq finished up 133.67 points, or 1.2%, at 11,190.32, logging back-to-back gains.

What’s driving the market?

Investors are awaiting the Fed’s first policy statement and updated economic projections under its new flexible inflation target strategy, which allows the central bank to let inflation run above 2% annually, and essentially calls for interest rates to remain lower for longer. Market participants are watching to see how the central bank and Chairman Jerome Powell communicate the implementation of its new policy measures, announced last month.

See: Fed to signal interest-rate hikes won’t be an issue until 2024

The Federal Open Market Committee will release a policy statement at 2 p.m. Eastern on Wednesday. Powell will hold a press conference a half-hour later; and although no major changes to benchmark interest rates, which stand between 0% and 0.25%, are expected, market watchers will hope to glean more guidance from the Fed on the state of the economy and the expected pace of the recovery from the deadly pandemic.

Read:The Fed is ‘fighting the last battle,’ and here are the risks to its new strategy

The prospect of a prolonged period of support from the Fed has helped bolster the U.S. stock market since its pandemic lows in March, but investors also are weighing that support against further delays to another fiscal spending package expected from Congress.

See: Why these strategists say at least $500 billion more is needed to fuel consumer spending during the pandemic

A reading on retail sales in August just missed the MarketWatch consensus forecast, rising 0.6% for the month. Sales topped pre-crisis levels during the month, but the rate of growth is slowing.

“The consumer has performed well so far given the health and economic impact from Covid, but there is still a long way to go in the recovery story,” said James Knightley, ING’s chief international economist, in written commentary, underscoring obstacles such as high unemployment, slim chances of “meaningful fiscal stimulus in the next few months” and the “clear threat that a fractious election” that endanger consumer sentiment and spending.

Keith Lerner, chief market strategist for SunTrust Advisory Services, continues to expect Washington will pass another round of fiscal stimulus, especially as incoming economic data continues to show the impact of the expiration of the earlier benefits.

Lerner pointed out that consumer discretionary exchange-traded funds
RCD,
+1.60%
 
XLY,
+0.59%
 remain near all-time highs. He views the recent correction in stocks as healthy for an overstretched market but cautions that volatility and uncertainty will likely keep stocks in a “two steps forward, one step back” pattern for the next few months.

The OECD’s latest forecast for global growth published Wednesday shows the global recession may not be as bad as expected. The Paris-based organization said it now expects the world economy to shrink 4.5% this year, less than its June prediction for a 6% decline, reflecting a slowly improving U.S. labor market and China data.

See: U.S. plans to make COVID-19 vaccine free, but only half of Americans say they’d take it

Which stocks are in focus?

• Shares of Southwest Airlines Co.
  LUV,
  +5.06%
   rose 2.8% Wednesday, after the air carrier updated its financial guidance trends, including and upbeat outlook for load factor and reducing its third-quarter outlook for daily cash burn.

• Eventbrite Inc.
  EB,
  +10.02%
   shares rocketed 9.2% after the online ticketer said it saw 17% growth in paid tickets in August compared with July, and 26% growth in paid tickets to in-person events. But August’s paid-ticket volume is still 65% lower than a year ago.

• Unity Software Inc. on Wednesday raised the expected pricing of its initial public offering to $44 to $48 a share from $34 to $42 a share.

• Facebook Inc. shares
  FB,
  -2.38%
    were in focus after a report that the Federal Trade Commission is preparing to file an antitrust lawsuit against the social-media giant. Shares lost about 2.1%.

• Shares of FedEx Corp.
  FDX,
  +6.77%
   were 5.8% higher midday after the delivery and logistics company reported better-than-expected profit and sales for its fiscal 2021 first quarter, saying that its workers’ effort had kept “the world’s health care, industrial and at-home supply chains moving despite the challenges of the global pandemic.”

• DraftKings Inc.
  DKNG,
  +9.52%
    shares gained about 9.7% after the company announced it would be the exclusive online betting platform for the New York Giants.

• Shares of Adobe Inc.
  ADBE,
  -2.34%
   were 2.7% lower despite a price target increase, to $550, from JPMorgan.

• Boeing Inc.
  BA,
  +3.63%
    shares were lower after a congressional committee released a report blasting the company for failing to take action that would have saved lives, despite knowing about flaws in the design of its 737 Max jets.

• Eastman Kodak Company
  KODK,
  +37.64%
   shares soared 37% Wednesday, after a special committee, hired by the digital imaging and printing systems company to investigate how it disclosed a U.S. government loan, found that no laws were broken.

• Snowflake Inc.’s stock
  SNOW,
  +123.33%
  looked poised to debut with a bang Tuesday, as early indications for the first trade continue to creep higher. The software company’s stock is indicated to open on the NYSE at around $215 to $220, according to FactSet data, which is 79.2% to 83.3% above the $120 IPO price.

How are other markets trading?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
0.680%
  ticked down 1 basis point to 0.67% as investors awaited the Fed decision. Bond prices move inversely to yields.

The ICE U.S. Dollar Index
DXY,
-0.06%,
which tracks the performance of the greenback against its major rivals, was down 0.1% to 92.90.

Gold futures
GCZ20,
+0.39%
rose 0.4% to $1,974.60 an ounce on the New York Mercantile Exchange. The U.S. crude oil benchmark
CL.1,
+5.01%
  was 4.6% higher at $40.04 a barrel as investors continued to watch Hurricane Sally move toward the Gulf Coast.

Global equities closed mixed, with the Stoxx Europe 600 index
SXXP,
+0.58%
  up 0.6%, and the U.K.’s benchmark FTSE 100
UKX,
-0.44%
  down 0.4%. In Asia, Hong Kong’s Hang Seng Index
HSI,
-0.02%
 closed fractionally lower and the Shanghai Composite
SHCOMP,
-0.35%
  lost 0.4%. Japan’s Nikkei
NIK,
+0.08%
 closed 0.1% higher.

Mark DeCambre contributed reporting