US stocks edged higher on Tuesday with central bankers on either side of the Atlantic poised to raise rates to their highest levels in 15 years.
Wall Street’s benchmark S&P 500 rose 0.5 per cent and the tech-heavy Nasdaq Composite gained 1 per cent by midday trading in New York.
Shares in Pfizer opened 1.4 per cent lower after the US drugmaker forecast a sharp drop in annual sales this year even as it posted record earnings per share for 2022. McDonald’s slipped 2.5 per cent despite the fast-food chain beating fourth-quarter sales expectations.
The moves come as Federal Reserve officials gather for their first policy meeting of the year, with investors expecting a quarter percentage-point rate increase on Wednesday in a move that would lift the fed funds rate to a new target range of 4.5 per cent to 4.75 per cent.
Such a rise would mark a return to a more normal tempo of policymaking after the Fed last year delivered four consecutive 0.75 percentage point increases before decelerating to 0.5 percentage points in December. Though inflation remains far from the Fed’s 2 per cent target, December’s level was the lowest since October 2021, at 6.5 per cent.
Trading in US equities is likely to be relatively subdued in the run-up to the Fed’s announcement. Tuesday “might be interesting but will ultimately be irrelevant,” said Mike Zigmont, head of trading and research at Harvest Volatility Management. “Whatever the market does will either be undone or reinforced by what the Fed says Wednesday.”
A measure of the dollar’s strength against a basket of six other currencies slipped 0.1 per cent, erasing earlier gains, while US government bonds rallied. The two-year Treasury yield, which is particularly sensitive to interest rate expectations, fell 0.04 percentage points to 4.21 per cent. Bond yields move inversely to prices.
The region-wide Stoxx Europe 600 traded 0.3 per cent lower even after data showed the eurozone economy grew in the final quarter of 2022, raising hopes that the region will avoid a deep recession. London’s FTSE 100 closed 0.2 per cent lower.
In Asia, Hong Kong’s Hang Seng index and China’s CSI 300 fell 1 per cent, South Korea’s Kospi lost 1.7 per cent, and Japan’s Topix fell 0.4 per cent.
Prices for Brent crude, the international oil benchmark, fell 0.5 per cent to $84.49 a barrel.