U.S. equities and stock exchange traded funds managed to push into positive territory for the fifth consecutive session as traders wait on the Federal Reserve’s latest meeting results that could provide further clues on where interest rates are heading next month.
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 up 0.1% Wednesday.
The Fed will announce its latest meeting minutes Wednesday afternoon, with many investors anticipating hints on where policy makers stand on the monetary policy. Furthermore, many are awaiting details regarding the Fed’s $4.5 trillion balance sheet.
“The real take from the Fed is that a June rate hike still seems to pretty much baked in the cake, but I’m going to be looking at guidance as how they expect to start spending down their excess assets,” Brad McMillan, chief investment officer for Commonwealth Financial, told Reuters.
Despite the recent mixed economic data, including a dip in consumer sentiment and spending, employment numbers remain strong, which may allow the Fed to continue tightening its monetary policy.
“The Fed is key,” Sam Stovall, chief investment strategist at CFRA Research, told the Wall Street Journal. Stovall believes it is likely the Fed will raise rates at its June 13-14 meeting, but that shouldn’t be “any kind of deterrent at all to the advance in equity prices.”
Tighter rates may help head off an overheating economy, but more importantly, many investors view rising rates as a vote of confidence in the U.S. economy, especially if the Fed moves at a gradual pace. Higher rates may also help strengthen some sectors, notably financial companies that profit off wider spreads.
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