Dow posts record close as Fed meeting starts, Trump talks to the UN

Dow posts record high as the Fed kicks off two-day monetary policy meeting 12 Hours Ago | 01:05

U.S. equities rose on Tuesday as the Federal Reserve kicked off a two-day monetary policy meeting.

The Dow Jones industrial average posted its 41st record close of the year, rising 39.45 points to 22,370.80. Verizon and Goldman Sachs contributed the most to the gains.

The S&P 500 gained 0.1 percent to a record of 2,506.65, with telecommunications and financials leading advancers. The Nasdaq composite advanced 0.1 percent and also posted a record close of 6,461.32.
The three major indexes had posted intraday highs on Monday.

The Fed is not expected to raise rates following its meeting. However, many market participants believe the central bank will announce the unwinding of its $4.5 trillion portfolio.

“They’ve kind of laid out the principles for the balance-sheet reduction process, but I expect to see that more formalized,” said Eric Stein, co-director of global income at Eaton Vance.

The U.S. central bank amassed most of its massive balance sheet as it tried to bring the economy back to life following the financial crisis.

“This is going to be unprecedented and every central bank in the world will be watching how” the Fed accomplishes this, said Quincy Krosby, chief market strategist at Prudential Financial. “But investors will also be looking for clues about whether we’ll get another rate hike in December.”

The Fed has already raised interest rates twice this year and it expects to hike once more before year-end. Market expectations for a December rate hike rose to 58.3 percent on Tuesday on strong imports data.

U.S. import prices posted their biggest gain in seven months in August amid a spike in petroleum costs.

Treasury yields rose slightly, with the benchmark 10-year yield at 2.24 percent and the two-year yield at 1.401 percent.

Wall Street also looked to the United Nations, where U.S. President Donald Trump tried to rally members to confront threats like North Korea. In a speech to the U.N. General Assembly, Trump said “North Korea’s reckless pursuit of nuclear weapons and ballistic missiles threatens the entire world with unthinkable loss of human life.”

Tension between the U.S. and North Korea has escalated recently. Last week, the isolated Asian nation launched a missile that flew over Japan before landing in the sea.

The launch took place after the U.N. Security Council unanimously imposed a ban on North Korea’s textile exports and capped its crude oil imports.

Investors also kept an eye on tax-reform prospects, after Sen. Bob Corker told reporters that GOP lawmakers had reached a tentative tax reform-budget deal. Wall Street has been waiting for clarity on tax reform since Trump won the president.

The market’s reaction to the news, however, was muted.

“The market is waiting for something more concrete at this point before really responding,” said Tim Alt, director of rates and currencies at Aviva Investors. “And with the Fed on tap for tomorrow, nobody wants to make any big bets.”

Gold range-bound ahead of US Fed policy statement

Gold held to a narrow range on Wednesday, with investors in a wait-and-see mode ahead of the outcome of a two-day U.S. Federal Reserve meeting that began on Tuesday.

Spot gold rose 0.1 percent to $1,312.54 an ounce by 0308 GMT.

U.S. gold futures for December delivery were up 0.4 percent at $1,316 an ounce.

“Trump’s comments overnight in regards to North Korea have certainly added a bid to the precious complex but all in all very quiet ahead of the (Fed statement),” a Sydney-based trader said, adding that the dollar was providing some support.

U.S. President Donald Trump escalated his standoff with North Korea over its nuclear challenge on Tuesday, threatening to “totally destroy” the country and mocking its leader, Kim Jong Un, as a “rocket man”.

Geopolitical risks tend to boost demand for safe haven assets such as gold and the Japanese yen.

The dollar edged slightly lower against a basket of currencies and against the yen on Wednesday. Asian stocks were steady as movements were limited ahead of the Fed’s monetary policy stance later in the day.

The U.S. Fed is expected to announce its balance sheet reduction plans later on Wednesday and provide an outlook for interest rate hikes for the rest of the year.

A stronger dollar makes the greenback-dominated bullion more expensive for those holding other currencies. Higher interest rates lead to higher bond yields and dampen demand for non-interest bearing gold.

“The majority of the consensus is there will be one more hike this year, and if that remains the case, gold should still remain reasonably well supported with what’s happening geopolitically,” the trader said.

“I think $1,300, $1,290 is certainly a good base for gold unless the Fed changes its wording with regards to how many hikes there will be in the coming months,” the trader said.

Spot gold still targets $1,299 per ounce, said Reuters technicals analyst Wang Tao.

Among other precious metals, silver edged 0.2 percent lower to $17.29 an ounce. Platinum rose 0.5 percent to $953.10 an ounce, after hitting its lowest since early August in the previous session.

Palladium gained 0.6 pct to $913.80 an ounce, after dropping to its lowest since mid-August on Tuesday.

Oil rises after Iraq signals possible OPEC cut extension

Oil prices rose on Wednesday after Iraq’s oil minister said OPEC and other crude producers were considering extending or even deepening a supply cut to curb a global glut, while a report showed a smaller-than-expected increase in U.S. inventories.

U.S. West Texas Intermediate (WTI) crude futures were up 33 cents, or 0.7 percent, at $49.81 a barrel at 0419 GMT. Brent crude futures climbed 23 cents, or 0.4 percent, to $55.37.

While options being considered by the Organization of the Petroleum Exporting Countries and other producers include an extension of cuts in output by months, it is premature to decide on what to do beyond March, when the agreement expires, Iraqi oil minister Jabar al-Luaibi told an energy conference in the United Arab Emirates on Tuesday.

 OPEC and producers including Russia have agreed to reduce output by about 1.8 million barrels per day until March 2018 in a bid to reduce global oil inventories and support prices.

“That won’t be easy as the productivity of oil rigs in the U.S. is expected to rise, so they can get more oil out of the same amount of rigs.”

Meanwhile, U.S. crude stocks rose last week while gasoline and distillate stocks decreased, data from industry group the American Petroleum Institute (API) showed on Tuesday.

Crude inventories rose by 1.4 million barrels in the week to Sept. 15 to 470.3 million, compared with expectations for an increase of 3.5 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 422,000 barrels, API said.

Official figures on stockpiles and refinery runs will be released by the U.S. Department of Energy later on Wednesday.