Wall Street abandons earlier gains as Fed, CPI awaited

Wall Street has given up earlier gains as the US central bank’s policy decision and the Consumer Price Index (CPI) are awaited.

The S&P 500 index is up 0.27% after rallying from a low of 4,279.10 to a high of 4,322.20, falling back to 4,303 currently. The benchmark S&P 500 closed Thursday 20% above its Oct. 12 finishing low and is holding up high on the session in what has been heralded as the start of a new bull market as defined by some market participants.

According to CMEGroup’s Fedwatch tool, there is a 72% chance of the US central bank holding interest rates at the current 5%-5.25% range in its June 13-14 policy meeting. The CPI data on Tuesday will help potentially shape expectations around further moves by the Fed.

Economists expect the Federal Open Market Committee (FOMC) to keep the target range for the federal funds rate unchanged this month given Powell’s bias toward a pause in June. However, stronger-than-expected economic data have already convinced about half of the FOMC that additional rate hikes are warranted.

The anticipated tightening of credit conditions has yet to materialize and provide a substitute for rate hikes. Therefore, analysts expect the FOMC to leave the door to a July rate hike wide open to convince the hawks to skip June. For now, one further rate hike of 25 bps is expected before the FOMC takes a pause for the remainder of the year.