Banks, Megacaps drive Wall Street as Fed decision looms

Wall Street’s main indexes rose on Tuesday, as investors picked up shares of financials and beaten-down Megacap companies, while staying cautious about the Federal Reserve’s ability to tame inflation without impeding growth.

Nine of the 11 major S&P 500 sectors rose, with energy (.SPNY) and financials (.SPSY) up 2.7% and 1.7%, respectively. The S&P 500 banks index (.SPXBK) gained 2.5%, with Citigroup Inc (C.N) climbing 3.8%.

The U.S. central bank kicked off its two-day policy meeting on Tuesday. Traders see a 99.9% chance of a 50 basis-point hike on Wednesday, according to CME’s FedWatch Tool, which would mark the largest rate hike by the Fed since May 2000. IRPR

The spotlight stays on Fed Chair Jerome Powell’s news conference on Wednesday for comments on the future path of interest rates and balance-sheet reduction. read more

The two main drivers of what’s going on in markets is the Federal Reserve meeting coming up on Wednesday, and some questions about what are the odds of a potential recession in 2022 or 2023.

In April, Wall Street was hammered by uncertainty around the Fed’s ability to engineer a soft landing for the economy, mixed earnings from some big growth companies, the war in Ukraine and pandemic-related lockdowns in China.

The Nasdaq Composite (.IXIC) slumped nearly 13.3% last month, its worst monthly performance since October 2008 as richly valued high-growth stocks came under pressure from rising rates.

At 1:59 p.m. EDT, the Dow Jones Industrial Average (.DJI) was up 136.06 points, or 0.41%, at 33,197.56, the S&P 500 (.SPX) gained 31.54 points, or 0.76%, to 4,186.92 and the Nasdaq Composite (.IXIC) added 76.83 points, or 0.61%, to 12,612.85.

The indexes were boosted by Apple Inc (AAPL.O), Tesla Inc (TSLA.O) and Exxon Mobil Corp (XOM.N) which rose between 0.6% and 2%.

Estee Lauder Cos Inc (EL.N) slumped 4.5% after the cosmetics maker cut its full-year profit forecast due to fresh COVID-19 restrictions in China and the Russia-Ukraine crisis. read more

Hilton Worldwide Holdings Inc (HLT.N) slid 2.9% after the hotel operator forecast a bleak full-year profit. read more

Western Digital Corp (WDC.O) jumped 15.5% as the largest percentage gainer on the S&P 500 after activist investor Elliott Investment Management urged the company to separate its Flash business and offered to invest $1 billion to facilitate a sale or a spin-off of the business. read more

Advancing issues outnumbered declining ones on the NYSE by a 2.42-to-1 ratio; on Nasdaq, a 1.59-to-1 ratio favored advancers.

The S&P 500 posted 2 new 52-week highs and 32 new lows; the Nasdaq Composite recorded 22 new highs and 160 new lows.