Nasdaq, S&P, Dow drift as traders digest BoJ's historic pivot, eye Fed rate decision

Dow Jones Industrials Average Rises Higher For 13th Day In Row, After Fed Raises Interest Rate

Spencer Platt

U.S. stocks on Tuesday were mixed, with headlines dominated by central bank action. Market participants digested a historic pivot by the Bank of Japan and looked ahead to a key Federal Reserve monetary policy decision that will be instrumental in shaping interest rate cut expectations this year.

The tech-heavy Nasdaq Composite (COMP.IND) slipped 0.08% to 16,090.59 points in mid-day trade, weighed down by technology stocks. Nvidia (NVDA) slipped after some analysts said that its new chips unveiled at its annual GTC conference had already been factored into the company’s stock price.

The benchmark S&P 500 (SP500) opened lower but has since reversed course to push up by 0.17% to 5,158.23 points. The blue-chip Dow (DJI) gained 0.63% to 39,034.39 points.

Of the 11 S&P sectors, eight were in the green, led by Energy.

Traders in the U.S. on Tuesday woke up to some major news: the Bank of Japan (BoJ) hiked its benchmark interest rate for the first time in 17 years and did away with other parts of its unorthodox monetary policy. The shift makes the BoJ the last major central bank to exit negative rates, and also brought an end to the Japanese central bank’s decade-long massive stimulus program based on ultra-loose monetary policy.

“On March 19, the BoJ revised its large-scale monetary easing policy framework for a deflationary environment, which consisted of negative interest rate policy (NIRP), yield curve control (YCC), and ETF purchases. Going forward, the BoJ will guide the short-term interest rate as its primary policy tool,” JPMorgan’s Rie Nishihara said.

“From a longer-term perspective, we believe today’s policy revisions are the first step toward a world of positive interest rates, and are likely to have only a limited impact on the economy because they merely represent an end to NIRP without any large increases in the deposit rate or long/short-term prime lending rates. The next rate hike will have a real impact through an increase in the deposit rate, but (BoJ) Governor Ueda made no clear comments on the outlook at the press conference, stating only that the pace of interest rate hikes would depend on the economy,” Nishihara added.

Investors now have their sights set firmly on the Fed’s second monetary policy decision of the year. Though the outcome is widely anticipated to be no change in interest rates, markets are more focused on the updated dot plot of economic and rate projections and Fed chair Jerome Powell’s comments for clarity on when rate cuts will start and the quantum of loosening.

Treasury yields were slightly to the downside on Tuesday, ahead of a $13B 20-year bond auction later in the afternoon. The longer-end 30-year yield (US30Y) was down 2 basis points to 4.45%, while the 10-year yield (US10Y) was down 4 basis points to 4.31%. The shorter-end more rate-sensitive 2-year yield (US2Y) was down 3 basis points to 4.70%.

See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.

Tuesday’s economic calendar was fairly light, with only housing starts and building permits on tap. Both metrics came in higher-than-anticipated for February.

Turning to active stocks, Super Micro Computer (SMCI) slumped and was the top percentage loser on the S&P 500 (SP500). The maker of artificial intelligence servers announced a proposed public stock offering and issued some clarifications over remarks made by its top boss in an interview.

Conversely, International Paper (IP) surged and was the top S&P percentage gainer, as Wall Street cheered the company’s naming of private-equity firm KKR’s (KKR) Andrew Silvernail as its new chief executive.

Roy Walsh

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