Wall Street wavered on Tuesday ahead of Fed statement. Previously, strategists at Morgan Stanley and JPMorgan has warned that stimulus program may not stimulate the economy as expected.
on Tuesday, U.S. stock trading volume was recorded as the second-lowest in 2016. The market and investors are waiting for Fed announcement. The Dow Jones Industrial Average increased 0.1% or 22.40 points, to close at 17251.53, while the S&P 500 dropped 0.2% or 3.71 points to 2015.93. The Nasdaq Composite slipped 0.5% or 21.61 points and closing at 4728.67.
Chief Equity Strategist at UBS Wealth Management Americas Jeremy Zirin explained to Wall Street Journal in a simple statement, "We're in a holding period."
The Fed will announce its policy on Wednesday after its Federal Open Market Committee (FOMC) meeting on March 15-16. The meeting will discuss the summary of U.S. economic projections and followed by press conference from Chairwoman Janet Yellen.
Although the Fed is predicted to keep the monetary policy unchanged, but investors are still waiting and watching closely for policy statement from the U.S. central bank. A recent readings on U.S. economy showed a positive result, with strong jobs report which boost expectation of the Fed will raise the interests rate.
However, recent data from Commerce Department on Tuesday showed a declining sales in U.S retail of 0.1% in February compared to previous month. While retail sales in January were revised to 0.4% drop, which is the opposite to previous report of a 0.2% raise. Senior global equity strategist at Wells Fargo Investment Institute Scott Wren commented the data, "It wasn't terrible. We're not going to change our outlook on a month of data."
Prior to the announcement, Morgan Stanley and JPMorgan cut its equities price target after series of stimulus program by European and Japanese central banks did not produce expected results. Morgan Stanley cut its 12-month price target for S&P 500 index to 2,050 from previous target of 2,175. Analysts suspected currency channel used by the monetary policy has no longer affected real economic activity.
"Central banks hold a declining number of less effective policy tools," Andrew Sheets, head of cross-asset strategy at Morgan Stanley wrote in his client's note as quoted by Bloomberg, "Their latest foray, negative rates, may do more harm than good."
CNBC also reported that in last Fed Survey, Wall Street fears negative interest rates. The survey showed 70% of 42 professional economists, money managers and investment strategist agreed that negative rates should not be used. There are only 18% supported the unconventional policy for central bank to charge banks for keeping money on deposit.
Ahead of Fed announcement, U.S. stocks swung on Tuesday. Investors and market are anxious to wait for U.S. economic projections following Federal Open Market Committee meeting on March 15-16.
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