An overview of the US stock market

Stocks in the United States fell on Monday, as all major averages finished the trading session in the red zone. Financials and utilities stocks led the S & P 500 index to drop, while health care and slightly reversed the trend. Market participants appear to hold their positions ahead of the Federal Reserve’s interest rate decision, due to be released on Wednesday. US company FedEx reported its financial results, with the data showing that the giant transportation company is moving between its ups and downs.


The results posted by FedEx came in lower than expected, and they provide a key look at the performance of the US economy. After the closing bell, Fedex reported its financial results and FedEx shares fell more than 5% after disappointing third quarter results. The revenue amounted to 17.01 billion versus the expected 17.67 billion. In addition, FedEx issued weak earnings per share guidance for 2019, between 15.10 and 15.90 compared to expectations of 15.97.


The Fed will conclude its two-day meeting on Wednesday, and no change in monetary policy is expected. Traders will likely focus on the dot plots that are considered as a future forecast of interest rates. As of December, more than 10 members of the Fed expected interest rates to rise by 2-3 times, or 75 basis points, in 2019. At the moment, the market has not priced in any possible change in interest rates by the end of 2019.


The Federal Reserve pivoted earlier on, in January, and since then stock prices have risen. As interest rates are unlikely to rise, economic data point to slightly slower growth. The Federal Reserve created a situation that would take more high-risk assets.


Another outstanding matter the Fed will have to answer is the bond mix they will stop selling. The Fed announced that they were about to complete the runoff of their stock portfolio. With this in mind, they must determine whether they should stick to bill or bonds for a long or short period. This decision is likely to have an impact on the values ​​of many different market bonds.


Both the Atlanta Fed GDPNow model and the New Fed’s Nowcast growth model are showing weak growth in the first quarter of 2019. The GDPNow model shows that GDP will rise by 0.4% in the first quarter, up from 0.2%. On the other hand, the New Fed model shows that we will notice a 1.4% growth instead, in the same period.


Ongoing trade talks

The recent news that US Trade Representative Robert Lighthizer and Treasury Secretary Stephen Mnuchin may travel to China to meet Chinese vice Premier Liu He in the week of March 25 helped boost stock prices. It is not clear how long the talks will go on for. Mr. Liu will make a trip back to Washington DC the following week. Reportedly, the trade negotiations between the two countries are the final stages, with a target date set for an agreement by the end of April.


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