NEW YORK: Wall Street’s main stock indexes edged higher on Tuesday, as investors awaited the Federal Reserve’s decision on interest rates in the face of rising energy costs due to the raging Middle East conflict.
Fuel-cost sensitive airlines and travel stocks that have faced the brunt of the sell-off got some relief after carriers Delta and American raised their revenue guidance for the current quarter. Delta Air Lines gained more than 4 percent, and American Airlines rose 2.7 percent.
Other travel stocks such as Norwegian Cruise added 2.4 percent and Expedia gained 6 percent.
“The consumer and market are not as worried about inflation right now as they were maybe a week ago. I think we’re starting to see the forest through the trees where this war is not going to last forever,” said Dennis Dick, founder at Triple D Trading.
Still, concerns of prolonged supply disruptions due to the effective closure of the Strait of Hormuz shipping route have kept crude prices at USD100 a barrel. Those concerns, along with tariff-induced price increases, will be the main focus of the Fed meeting as policymakers weigh inflation concerns against signs of a weakening jobs market.
The central bank starts its two-day monetary policy meeting on Tuesday and traders expect borrowing costs to be left unchanged in its decision on Wednesday.
Rate futures suggest just one 25-basis-point cut towards the end of the year, according to LSEG-compiled data, down from around two before the war.
Brokerages lifted their outlooks for energy prices that are likely to dampen economic growth, a factor that the Australian central bank also flagged when it hiked interest rates earlier in the day. The rate-sensitive financials index gained 0.8 percent, rebounding from sharp losses in the week before, when worries about private credit quality rattled investors.
Asset managers Blackstone and Apollo Global gained over 3 percent and KKR gained nearly 3 percent. At 12:07 p.m. ET, the Dow Jones Industrial Average rose 72.20 points, or 0.15 percent, to 47,021.88, the S&P 500 gained 14.91 points, or 0.22 percent, to 6,714.29 and the Nasdaq Composite gained 53.68 points, or 0.24 percent, to 22,427.86.
Wall Street’s fear gauge, the CBOE volatility index, dropped 0.62 points to 22.89 to briefly hit a more than one-week low.
Energy company Occidental gained 1.3 percent along with peer EQT, while ConocoPhillips rose nearly 2 percent tracking higher crude and gas prices.
Despite the global turmoil in markets due to the war, US stocks have held up better than those in Europe and Asia on expectations that the repercussions on the economy will be less severe.
However, analysts have underscored that investors are yet to fully consider the effects of the war on the global economy. Honeywell International slipped 2.1 percent after the industrial giant said the conflict could impact its first-quarter revenue, weeks after oilfield services company SLB flagged an earnings squeeze. The conflict has also delayed a planned summit between the US and China’s leaders on President Trump’s request.
Among others, Eli Lilly lost 5.2 percent after brokerage HSBC downgraded the drugmaker to “reduce” from “hold”. Ride-hailing app Uber added 5.1 percent after announcing plans to roll out robotaxis in 28 cities starting next year, powered by Nvidia’s autonomous driving software. Advancing issues outnumbered decliners by a 2.67-to-1 ratio on the NYSE and by a 1.61-to-1 ratio on the Nasdaq. The S&P 500 posted 20 new 52-week highs and two new lows while the Nasdaq Composite recorded 41 new highs and 97 new lows.
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