Fed Policy Keeps Stock ETF Traders on Edge

U.S. equities and stock exchange traded funds slightly dipped Monday as investors prepped for the widely anticipated Federal Reserve interest rate hike later this week.

The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.1% lower Monday.

“It’s the calm before the storm,” David Lafferty, chief market strategist at Natixis Global Asset Management, told the Wall Street Journal. “The market is still coalesced around three tightenings this year, but there’s certainly room for four.”

With the Federal Reserve meeting this week, the Federal Open Market Committee meeting announcement will be revealed Wednesday when many market observers expect the central bank to raise borrowing costs for the first time this year – fed-funds futures show options traders are pricing in a 95% chance of a rate hike.

Meanwhile, analysts will be sifting through the minutes to gain a clearer picture on how aggressively the Fed will act with its monetary policy in the year ahead.