Wall Street holds gains following Fed decision

Wall Street’s main indexes were muted on Wednesday as investors steered clear of big bets ahead of the Federal Reserve’s policy decision later in the day, while regional banks took a breather after a steep selloff in the previous session.

Major U.S. stock indexes dropped more than 1% on Tuesday as regional bank shares tumbled on renewed fears over the financial system and as investors tried to gauge how much longer the Fed may need to hike interest rates.

Regional lender PacWest Bancorp, one of the worst hit stocks in the previous session, gained 4.1% on Wednesday, while the KBW Regional Banking index advanced 1.4%.

While the Fed is widely expected to deliver a 25-basis point interest rate hike, investor focus will be on cues if further hikes are on the cards given inflation remains above the U.S. central bank’s 2% target level.

“The Fed is still stuck between a rock and a hard place,” said Joshua Chastant, senior investment analyst at GuideStone Financial Resources.

“Inflation is still elevated and unemployment is very low, so they’re trying to walk the tightrope of not sending a signal that they’re completely done hiking rates, but also not necessarily wanting to send the economy in a downcycle.”

Major global central banks have embarked on an aggressive interest rate hike campaign to tackle sticky inflation, with the Fed already having hiked its benchmark rates nine times by 475 basis points to a range of 4.75%-5.00% since March 2022.

Graphic: U.S. Fed interest rate increases - https://fingfx.thomsonreuters.com/gfx/mkt/dwvkdqqgepm/Fed%20rate%20hikes.png

Data on Wednesday showed U.S. private employers boosted hiring in April, but there are signs that the labor market is slowing amid higher interest rates.

A separate report showed U.S. services sector maintained a steady pace of growth in April, but higher input prices indicated inflation could remain elevated for some time.

At 11:35 a.m. ET, the Dow Jones Industrial Average was down 35.48 points, or 0.11%, at 33,649.05, the S&P 500 was up 0.58 point, or 0.01%, at 4,120.16, and the Nasdaq Composite was up 22.13 points, or 0.18%, at 12,102.64.

Wall Street’s main indexes were muted on Wednesday as investors steered clear of big bets ahead of the Federal Reserve’s policy decision later in the day, while regional banks took a breather after a steep selloff in the previous session.

Major U.S. stock indexes dropped more than 1% on Tuesday as regional bank shares tumbled on renewed fears over the financial system and as investors tried to gauge how much longer the Fed may need to hike interest rates.

Regional lender PacWest Bancorp, one of the worst hit stocks in the previous session, gained 4.1% on Wednesday, while the KBW Regional Banking index advanced 1.4%.

While the Fed is widely expected to deliver a 25-basis point interest rate hike, investor focus will be on cues if further hikes are on the cards given inflation remains above the U.S. central bank’s 2% target level.

“The Fed is still stuck between a rock and a hard place,” said Joshua Chastant, senior investment analyst at GuideStone Financial Resources.

“Inflation is still elevated and unemployment is very low, so they’re trying to walk the tightrope of not sending a signal that they’re completely done hiking rates, but also not necessarily wanting to send the economy in a downcycle.”

Major global central banks have embarked on an aggressive interest rate hike campaign to tackle sticky inflation, with the Fed already having hiked its benchmark rates nine times by 475 basis points to a range of 4.75%-5.00% since March 2022.

Data on Wednesday showed U.S. private employers boosted hiring in April, but there are signs that the labor market is slowing amid higher interest rates.

A separate report showed U.S. services sector maintained a steady pace of growth in April, but higher input prices indicated inflation could remain elevated for some time.

At 11:35 a.m. ET, the Dow Jones Industrial Average was down 35.48 points, or 0.11%, at 33,649.05, the S&P 500 was up 0.58 point, or 0.01%, at 4,120.16, and the Nasdaq Composite was up 22.13 points, or 0.18%, at 12,102.64.