S&P 500 pares its losses and eyes a re-test of 3800 post-US Retail sales ahead of FOMC’s decision

• US stocks are climbing ahead of the Federal Reserve monetary policy decisions, expected to hike 75 bps.
• The Nasdaq Composite leads the pack, followed by the S&P 500 and the Dow Jones.
• The US Dollar Index falls, weighed by the drop of US Treasury yields.

US equities recovered some ground after a string of five days of losses and are gaining between 1.05% and 1.54% on Wednesday as investors expect the Federal Reserve’s monetary policy decision, with the majority of estimates around a 75 bps rate hike.

Risk appetite increased, but for how long?

The S&P 500 is rising 1.12% currently at  3,776.07, followed closely by the heavy-tech Nasdaq Composite, jumping 1.31% at 11459.56. At the bottom of the pile is the Dow Jones Industrial Average, which is up by 0.95% sitting at 30,654.16

US Retail Sales recorded their first drop in five months, decreasing 0.3% MoM; excluding autos and gas, uptick by 0.1%. It’s worth noting that April’s figures were revised down but stayed positive. Meanwhile, comparing numbers on an annual basis, Retail Sales jumped to 8.1%, higher than April’s 7.8%.

In the meantime, the US Dollar Index retreats from the fresh 20-year high and sits around 105.318, down 0.15%. US Treasury yields remain elevated but tumbled. The US 10-year note yields 3.398%, down eight basis points.

The market sentiment is positive but remains fragile. While Wall Street adjusted their forecasts to 75 bps, some voices suggest the Fed would need to move by 1% so that they can restore the central bank’s “credibility.” However, a move of that size would turn the mood sour, and equities could continue sliding.

In terms of sector specifics, the leading gainers are Consumer Discretionary, up 1.75%, followed by Real Estate and Technology, each recording gains of 1.34% and 1.27%, respectively. The main losers are Energy, Materials, and Consumer Staples, losing 1.45%, 0.05%, and 0.01% each.

In the commodities complex, the US crude oil benchmark, WTI, is losing 0.94%, trading at $117.90 BPD, while precious metals like gold (XAU/USD) is gaining 0.70%, exchanging hands at $1820.86 a troy ounce, as US Treasury yields, fall ahead of the FOMC’s decision.

S&P 500 Daily Chart

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