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US Stock Market: A Mixed Picture Amid Inflation, Fed Meeting Anticipation

Here's a closer look at the fluctuating dynamics of the US stock market, with investors eyeing up the Federal Reserve meeting and inflation data.

Federal Reserve

Expectations in the Wake of Inflation Data and Fed Policy Meet

On Tuesday, the US stock market exhibited an uncertain performance despite some sectors tied closely to the economy making strides. Market watchers and investors eagerly anticipate inflation figures and next week's Federal Reserve policy meeting. The forthcoming inflation data is predicted to indicate a minor month-to-month cooling in consumer prices for May, while core prices are suspected of remaining high. Moreover, the consensus is that the Fed will maintain the status quo with interest rates.

Performance of Major Indices Amid Investor Optimism

Investors seemed to hit a pause after driving the S&P 500 nearly 20% up from its lows in October 2022. Major gains in top-tier stocks powered this growth, a strong earnings season surpassing expectations, and the optimism that the US central bank could soon wrap up its cycle of hiking interest rates. Meanwhile, the Dow Jones Industrial Average took a slight dip of 0.26%, equivalent to 87.07 points, closing at 33,475.79. The S&P 500 edged up slightly by 0.01% or 0.47 points, settling at 4,274.26, while the Nasdaq Composite climbed 0.21%, an increase of 28.09 points, ending at 13,257.52.

Broader Market Movement and Fed Rate Hold Expectations

According to Cresset Capital CIO Jack Ablin, there's a growing sense of investor optimism, with the market's focus seemingly starting to broaden. The financial sector led the way, surging 1.05%, with the KBW regional banking index leaping 4.77%. The Russell 2000 index, which comprises small-cap companies, saw a substantial gain of 2.28%. Given recent economic data and the dovish signals from Fed officials, there are heightened expectations that the Fed will keep interest rates steady in the June 13-14 meeting.

Futures and Volatility Outlook Amid Market Predictions

Traders are already pricing in a nearly 80% likelihood of the central bank maintaining the current interest rates in the 5%-5.25% bracket, according to CMEGroup's Fedwatch tool. Conversely, they're assigning a 50% chance of another rate hike of 25 basis points in July. Meanwhile, the CBOE volatility index, a measure of market anxiety, has dropped to its lowest level since July 2021, decreasing by 0.36 points to 14.37.

Major Stocks Performance Overview

Coinbase Global saw a steep drop of 13.04% on the corporate front after the US Securities and Exchange Commission filed a lawsuit against the crypto exchange for allegedly operating without proper registration. Apple Inc also saw a slight decrease of 0.16% following the unveiling its high-priced Vision Pro augmented-reality headset, thus stepping into a market dominated by Meta. On the flip side, Advanced Micro Devices experienced a 4.20% increase after Piper Sandler increased the stock's price target to $150, the second-highest on Wall Street, as reported by Refinitiv.

Market Breadth Indicating Positive Movement

In a show of broader market sentiment, advancing issues significantly outnumbered declining ones on the NYSE by a 2.72-to-1 ratio. Similarly, on Nasdaq, the ratio favoring advancers was 2.25-to-1. The S&P 500 posted 14 new 52-week highs and five new lows, while the Nasdaq Composite documented 92 new highs and 62 new lows.