Stock Tick up ahead of Federal Reserve Monetary Decision
Stocks are slightly up on Wednesday before the Federal Reserve announces its decision on interest rates.
Quick overview
- All three major U.S. stock indices gained 0.1% leading into the Federal Reserve's monetary policy decisions.
- The ongoing conflict in Iran has caused fluctuations in oil prices, impacting stock market volatility.
- Investors are concerned about the at-risk oil supply due to military actions affecting production and shipping.
- The Federal Reserve is expected to maintain the current interest rate, which could lead to a market dip after the announcement.
On Wednesday, all three major U.S. stock indices added 0.1% leading into the day’s monetary policy decisions from the Federal Reserve.
The Dow gained 0.1% on Wednesday morning in early trading, while the Nasdaq and S&P 500 both gained the same 0.1%. As has been the case since the Iran conflict started, stocks tend to rise when oil prices dip, and West Texas Intermediate futures fell to $94 a barrel on Wednesday- a decline of 1.5%.
The Federal Reserve is scheduled to meet later in the day and make a decision on interest rates. The vote could go either way- President Donald Trump has been pushing for rate cuts and the inflation rate has remained flat. On the other hand, inflation is still above the 2% that the Fed has been aiming for, and conflict in Iran could make matters worse.
Ongoing Conflict Causes Stock Prices to Fluctuate
The fighting in the Middle East has led to extreme price increases for the oil and gas industries, which in turn has created price fluctuations on the stock market. Stocks have been volatile for weeks as they move at the mercy of fluctuating oil prices.
President Trump has promised to protect ships passing through the dangerous Strait of Hormuz where Iranian forces have already destroyed one tanker. He has called on allies to form a coalition to assist, but reports say that not everyone asked is eager to help out.
Investors in the oil and stock markets are worried about the at-risk oil supply. With production facilities shutting down in Iran and nearby areas and shipping lanes becoming targets of opportunity for military forces, many supplies have been halted or redirected. The global impact has been significant, with oil suppliers switching their deliveries scheduled for South American countries to Europe and Asia in order to make a greater profit.
The rapidly shifting oil and gas markets and the changing situation in Iran have made the stock market more unpredictable than ever. The Fed interest rate decision is this week’s big influencing factor for the stock market, and Wall Street anticipates no change in the current 3.5-3.75% rate. Federal Reserve Chair Jerome Powell is likely to mention oil prices when laying out the Fed’s decision this week, and if he does, investors will watch those oil prices more closely for indications of future stock price change.
The stock market is hesitant and subdued at the moment, but once the Fed announces its decision, we expect the market to move quickly. If the Fed keeps the rate where it is, then the market is likely to dip Wednesday afternoon.
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