U.S. Stocks at Records, Dollar Weaker as Fed Meets: Markets Wrap

  • Policy makers expected to comment on unwinding of stimulus
  • European gauge slips as Japanese shares surge after holiday

Merrill Lynch Says Tightening Not on Preset Course

Major U.S equity benchmarks padded all-time highs, the dollar fell and Treasuries edged lower after Donald Trump gave a speech to the United Nations and as the Federal Reserve began a two-day meeting.

The S&P 500 Index climbed for a third day, though equities remain stuck in one of the tightest ranges in decades. The CBOE Volatility Index slumped toward 10. Europe’s equity benchmark followed many Asian peers lower, while Japanese shares surged after a holiday.

The pound swung before jumping after a report Foreign Secretary Boris Johnson may resign should Prime Minister Theresa May oppose his Brexit demands. The euro rose for a fourth day, while the dollar slipped against all but one of its G-10 peers. Benchmark WTI crude fell below $50 per barrel.

President Donald Trump delivered his first address before the UN General Assembly on Tuesday.

Source: Bloomberg)

Financial markets remained largely calm on Tuesday as Trump’s speech to the UN did little to alter views on the tensions over North Korea’s nuclear ambitions. Attention will turn to Wednesday’s Fed decision, with a focus on details on unwinding part of the central bank’s $4.5 trillion balance sheet.

“We are not overly concerned about” the Fed’s quantitative-tightening plans, Merrill Lynch and U.S. Trust head of fixed-income strategy Matthew Diczok told Bloomberg TV. “If you model it out, over about the next three years they’ll take out about $1.3 trillion or so. That’s only a third of what they put into the market. So it’s going to be very slow, very gradual, very deliberate and it shouldn’t lead to any near-term fireworks into the market at all.”

Terminal subscribers can read more in our Markets Live blog.

What to watch out for this week:

  • Brexit strategy is in focus as Theresa May prepares to outline her revised approach on Friday.
  • The Fed’s rate decision is Wednesday.
  • The Bank of Japan is predicted to stand pat when it reviews policy Thursday. The BOJ probably won’t reveal when it will unwind stimulus, but could signal determination to keep the yield curve under control.
  • Indonesia, the Philippines and South Africa are among countries also reviewing monetary policy this week.
  • Home construction and sales of previously owned properties are the highlights of the week’s U.S. economic calendar.
  • Campaigning continues in Germany, days before the Sept. 24 election. New Zealand goes to the polls on Sept. 23.

Here are the main moves in markets:

Stocks

  • The S&P 500 Index climbed 0.1 percent to 2,506.64 as of 4 p.m. in New York.
  • The Dow Jones Industrial Average added 0.2 percent to 22,370.70, and the Nasdaq Composite Index rose 0.1 percent.
  • The Stoxx Europe 600 Index was virtually unchanged after erasing earlier declines.
  • The MSCI All-Country World Index increased 0.3 percent to the highest on record.
  • The MSCI Emerging Market Index dropped 0.2 percent.

Currencies

  • The Bloomberg Dollar Spot Index decreased 0.1 percent, with the greenback dropping versus all G-10 peers save the Swiss franc.
  • The euro climbed 0.4 percent to $1.1997, the strongest in more than a week.

Bonds

  • The yield on 10-year Treasuries was slightly higher at 2.2375 percent.
  • The bond-market selloff that pushed intermediate and long-term Treasury yields up from 2017 lows reached Sept. 8 is on the brink of making five-year notes a buy, according to technical analysis by Aaron Kohli at BMO Capital Markets.
  • Toys ‘‘R’’ Us Inc. succumbed to what it called a “dangerous game of dominoes” that toppled it in a matter of days.

Commodities

  • Gold futures slipped less than 0.1 percent to settle at $1,310.60 an ounce as of 1:39 p.m. in New York.
  • West Texas Intermediate crude fell for the first time in more than a week as traders awaited storage data that may show the longest expansion of U.S. crude inventories in almost half a year.
  • WTI futures lost 0.9 percent to settle at $49.48 a barrel.
  • Coal will drop and stabilize about 10 percent lower than current levels after tight supply and strong demand from Asian consumers drove prices to near $100 a ton, according to producer New Hope Corp.

— With assistance by Robert Brand, Alex Harris, and Samuel Potter

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