Dow up 200 points as stock market aims to snap four day skid with Fed decision in focus

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By Barbara Kollmeyer and Mark DeCambre

Unit of China Evergrande says it will make on-time bond payment

U.S. stock benchmarks rose Wednesday morning, with investors fixated on the outcome of the Federal Reserve meeting which concludes later in the session as well as on developments with the highly levered property developer China Evergrande.

How are stock-index futures trading?

On Tuesday, the Dow fell 51 points, or 0.15%, to 33920, the S&P 500 declined 4 points, or 0.08%, to 4354, and the Nasdaq Composite gained 32 points, or 0.22%, to 14746. The Dow and S&P 500 marked a fourth straight day of losses, which was the worst stretch for the S&P 500 since mid-May.

What’s driving the market?

It is Fed day on Wall Street.

Investors are awaiting the Fed’s updated policy statement at 2 p.m. Eastern, followed by a news conference with Fed Chairman Jerome Powell at 2:30 p.m., with the market anticipated that the rate-setting Federal Open Market Committee will provide some guidance about the timing and pace of tapering its debt purchases, which provided much-needed liquidity to financial markets amid the worst of the COVID pandemic in 2020.

A number of strategists expect that an official announcement of tapering of monthly purchases of $120 billion in Treasurys and mortgage-backed securities won’t come until November or December, with an eye toward concluding those purchases at in the middle of next year.

Beyond tapering, investors will pay attention to the outlook for interest rates, which currently stand a range between 0% and 0.25%.

Meanwhile, worries about China’s indebted property company Evergrande eased somewhat on Wednesday.

While Hong Kong markets were closed for a holiday, Frankfurt-listed shares of China Evergrande surged 50% after a unit of the company, Hengda Real Estate Group, pledged to make an on-time interest payment on Thursday. Separately, China’s central bank reportedly injected liquidity as markets reopened after a two-day holiday and talk of a restructure of Evergrande has eased some of the initial panic on Wall Street tied to worries about financial contagion akin to what occurred in 2008 when U.S. investment bank Lehman Brothers failed.

However, investors remain wary though, as Evergrande itself still faces interest payments on bonds in coming days.

“While the markets are rebounding, we think its to soon to think the Evergrande situation will blow over without causing more near- term market pain,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

Read:Fed could fracture in 2022 over when to raise interest rates, economist says

“That means this week’s meeting may be an appropriate moment for the Fed to give the market fair warning. Or not. In a sense it doesn’t matter much what they say or don’t say on tapering–the risk lies in what the Fed does or doesn’t say about rate hikes,” said Neil Wilson, chief market analyst at Markets.com.

Wilson said the central bank is also likely to look through softer economic data and stock market pullbacks seen recently.

Ahead of the Fed decision, investors will parse an August update on existing home sales at 10 a.m.

In Washington, the House voted late Tuesday to keep funding the government and avoid a shutdown, but faced opposition in the Senate given the Republican party’s opposition to raising the debt ceiling.

-Barbara Kollmeyer

Which companies are in focus?

How are other assets trading?

 

(END) Dow Jones Newswires

09-22-21 1003ET

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