Wall Street’s main stock indexes rose on Tuesday, led by gains in financial stocks, as investors awaited the Federal Reserve’s decision on interest rates in the face of rising energy costs due to the raging Middle East conflict.
The central bank starts its two-day monetary policy meeting on Tuesday and traders expect borrowing costs to be left unchanged when it announces its decision on Wednesday.
Rising oil and natural gas costs stemming from the conflict in the Middle East, along with tariff-induced price increases, will be the main focus of the meeting as policymakers weigh inflation concerns against signs of a weakening jobs market.
Brokerages lifted their outlooks for energy prices that are likely to dampen economic growth, a factor that the Australian central bank also flagged when it hiked interest rates earlier in the day.
Fed Chair Jerome Powell’s outlook on interest rates will be scrutinized on Wednesday, at a time when rate futures suggest just one 25-basis-point cut towards the end of the year, according to LSEG-compiled data, down from around two before the war.
Wall St rises as Middle East conflict limits gains
“There are too many moving parts in a regular economy and then on top of it, we have this tremendously impactful conflict, which will make it even more impossible for the Fed to discern any patterns right now,” said Peter Andersen, founder of Andersen Capital Management.
“I would expect the Fed to stay on hold and to have a very unremarkable transcript and press conference.”
Leading gains among the S&P 500 sectors was the rate-sensitive financials index as big banks Morgan Stanley and Goldman Sachs gained more than 2%,
while asset managers Apollo Global and KKR gained more than 4% each.
Financial stocks were rebounding from sharp losses in the week before, when worries about private credit quality rattled investors.
At 10:12 a.m. ET, the Dow Jones Industrial Average rose 321.19 points, or 0.68%, to 47,267.60, the S&P 500 gained 36.45 points, or 0.54%, to 6,735.83 and the Nasdaq Composite gained 120.48 points, or 0.54%, to 22,494.66.
Wall Street’s fear gauge, the CBOE volatility index, dropped 1.1 points to 22.41, while the rate-sensitive Russell 2000 index gained 1%.
Oil price-sensitive airlines that have faced the brunt of the selloff since the war started got some reprieve after Delta raised its revenue guidance for the current quarter on accelerated demand. The carrier’s shares gained 5% and American added 4.4%.
Energy company Occidental gained 1% along with peers ConocoPhillips and EQT, tracking higher crude and gas prices.
Despite the global turmoil in markets due to the war, U.S. stocks have held up better than those in Europe and Asia on expectations that the repercussions on the economy will be less severe.
However, analysts have underscored that investors are yet to fully consider the effects of the war on the global economy.
Honeywell International slipped 0.3% after the industrial giant said the conflict could impact its first-quarter revenue, weeks after oilfield services company SLB flagged an earnings squeeze.
The conflict has also delayed a planned summit between the U.S. and China’s leaders on President Trump’s request.
Among others, ride-hailing app Uber added 5.6% after announcing plans to roll out robotaxis in 28 cities starting next year, powered by Nvidia’s autonomous driving software.
Advancing issues outnumbered decliners by a 4.77-to-1 ratio on the NYSE and by a 2.48-to-1 ratio on the Nasdaq.
The S&P 500 posted 15 new 52-week highs and one new low while the Nasdaq Composite recorded 28 new highs and 60 new lows.
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