U.S. Stocks Seeing Modest Strength As Fed Decision Approaches

(RTTNews) - After initially showing a lack of direction, stocks have moved mostly higher over the course of the trading session on Wednesday. The major averages have all moved to the upside, partly offsetting the steep losses posted in the previous session.

Currently, the tech-heavy Nasdaq is up 56.83 points or 0.5 percent at 12,137.33, and the S&P 500 is up 12.73 points or 0.3 percent at 4,132.31. The narrower Dow is posting a more modest gain, up 43.56 points or 0.1 percent at 33,728.09.

The modest strength on Wall Street may partly reflect traders picking up stocks at relatively reduced levels following the sell-off seen on Tuesday.

Overall trading activity has remained subdued, however, as traders look ahead to the Federal Reserve's monetary policy announcement.

With the Fed widely expected to raise interest rates by another 25 basis points, traders will pay close attention to the accompanying statement for clues about the outlook for rates.

CME Group's FedWatch Tool is currently indicating an 85.4 percent chance the Fed will raise rates by 25 basis points and an 82.39 percent chance the central bank will subsequently leave rates unchanged in June.

"The Federal Reserve will announce its latest interest rate decision later today and investors will be hanging on their every word in light of recent banking sector instability," said Craig Erlam, Senior Market Analyst at OANDA.

He added, "Today was always likely to mark the end of the US central bank's tightening cycle - not that it has explicitly signaled this - but we've now reached a stage in which every rate hike could have unwanted and unintended consequences."

On the U.S. economic front, payroll processor ADP released a report showing private sector employment in the U.S. increased by much more than expected in the month of April.

ADP said private sector employment surged by 296,000 jobs in April after climbing by a revised 142,000 jobs in March.

Economists had expected private sector employment to advance by 148,000 jobs compared to the addition of 145,000 jobs originally reported for the previous month.

A separate report released by the Institute for Supply Management showed U.S. service sector activity grew at a slightly faster rate in the month of April.

The ISM said its services PMI crept up to 51.9 in April from 51.2 in March, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 51.8.

Sector News

Computer hardware stocks have shown a substantial move to the upside on the day, driving the NYSE Arca Computer Hardware Index up by 3.1 percent.

Super Micro Computer (SMCI) has led the sector higher, skyrocketing by 29.2 percent after providing upbeat fiscal fourth quarter guidance.

Significant strength is also visible among airline stocks, as reflected by the 1.8 percent gain being posted by the NYSE Arca Airline Index.

Housing, pharmaceutical and utilities stocks are also seeing notable strength, while oil stocks are extending yesterday's sell-off amid a continued nosedive by the price of crude oil.

With crude for June delivery plunging $3.05 to $68.61 a barrel, the NYSE Arca Oil Index has fallen by 1.2 percent to its lowest intraday level in over a month.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday, with markets in Japan and China closed for holidays. Hong Kong's Hang Seng Index dove by 1.2 percent, while South Korea's Kospi slid by 0.9 percent.

Meanwhile, the major European markets moved to the upside on the day. While the German DAX Index climbed by 0.6 percent, the French CAC 40 Index rose by 0.3 percent and the U.K.'s FTSE 100 Index edged up by 0.2 percent.

In the bond market, treasuries are extending the rally seen over the course of the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.7 basis points at 3.382 percent.