Wall St wavers ahead of Fed decision; Bessent plays down intervention

Stocks on Wall Street teetered between positive and negative territory ahead of the Federal Reserve’s latest policy decision, which is widely expected to keep the federal funds rate range unchanged and chair Jerome Powell’s briefing predicted to stick to the script for rates to stay on hold for the next few meetings.

Meanwhile, US Treasury secretary Scott Bessent played down speculation the US is intervening in currency markets and reiterated the federal government’s strong-dollar policy after President Donald Trump’s lack of concern about the greenback’s slide pushed the world’s reserve currency lower.

The Magnificent 7 megacap tech stocks were mixed heading into earnings from Microsoft, Meta Platforms and Tesla after an upbeat lead on artificial intelligence after Dutch chipmaking equipment supplier ASML beat earnings expectations and provided an optimistic outlook for the year.

And Australian futures are pointing to a marginally softer start to the trading day across the Tasman after quicker inflation than expected cemented expectations the Reserve Bank of Australia to hike its benchmark rate next week, while Statistics New Zealand will release December trade figures and the ANZ's monthly business sentiment survey is due.

Central thinking

The Federal Reserve’s open markets committee is expected to keep the federal funds rate in a range of 3.5% and 3.75% when it announces its latest policy decision, with the focus on chair Jerome Powell’s briefing soon after the release.

“Policy is expected to be on hold over coming meetings and this should be reflected in chair Powell’s comments,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “The meeting ought to pass with muted market reaction.”

Stocks on Wall Street were mixed with the tech-heavy Nasdaq Composite marginally in positive territory and the S&P 500 down 0.1% ahead of the Fed decision and as big tech firms Microsoft, Meta and Tesla are poised to announce their latest earnings after the bell.

Dutch chipmaking equipment supplier ASML set a positive tone for the big tech firms after beating earnings expectations and lifting its outlook for the year on strong AI demand. Still, the looming Fed decision cast a pall over European markets, with the UK’s FTSE falling 0.5%, Germany’s Dax 30 slipping 0.3% and France’s CAC 40 down 1.1%.

The greenback clawed back some of its losses against the yen after US Treasury secretary Scott Bessent said the US isn’t intervening in currency markets, telling CNBC the White House has a strong-dollar policy. The kiwi increased to 60.34 US cents at 7am in Auckland from 60.16 cents yesterday.

Golden times

Gold continued to surge in the uncertain geopolitical environment after US President Donald Trump warned Iran to make a nuclear deal or face a military strike, making his comments on the Truth Social platform as a US Navy carrier strike group arrived in the Middle East.

Gold futures jumped 4% to US$5,286 an ounce, while Brent crude futures increased 0.5% to US$65.90 a barrel.

Meanwhile, shipping giant Maersk warned snow storms in Europe were disrupting logistics operations in the southwest and west of the continent. NZX-listed Mainfreight’s European operations account for about 23% of the firm’s revenue.

And the European Food Safety Authority will publish advice on acceptable level of the cereulide toxin in infant formula, which is the ingredient at the heart of the current food recalls hitting the likes of Danone and Nestle, which The a2 Milk Co has managed to avoid so far.

Australian futures are pointing to a 0.1% decline for the S&P/ASX 200 index when trading opens across the Tasman. Australia’s benchmark index dropped yesterday after Bureau of Statistics figures showed a faster pace of inflation in the December than some economists predicted, stoking expectations for the Reserve Bank of Australia to hike its target cash rate a quarter point when it meets next week.

Local data include Stats NZ’s December merchandise trade figures, with the deficit expected to narrow, while the ANZ business outlook is predicted to show firms are still confident about the year ahead.

Reporting by Paul McBeth. Image from Tomas Eidsvold on Unsplash.