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Stock Market News for Sep 20, 2022

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U.S. stocks closed higher on Monday in a volatile trading session ahead of the Fed’s two-day policy meeting that begins on Tuesday. Investors are bracing for another steep rate hike this week. All three major indexes ended in positive territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) gained 0.6% or 197.26 points to close at 31,019.68 points.

The S&P 500 advanced 0.7% or 26.56 points to finish at 3,899.89 points. Consumer discretionary and materials stocks were the biggest gainers, while energy and real estate stocks were the worst performers.

The Consumer Discretionary Select Sector SPDR (XLY) gained 1.2%, while the Materials Select Sector SPDR (XLB) added 1.1%. The Energy Select Sector SPDR (XLE) and the Real Estate Select Sector SPDR (XLRE) lost 1.1% and 1%, respectively.  Eight of the 11 sectors of the benchmark index ended in positive territory.

The tech-heavy Nasdaq climbed 0.8% or 86.62 points to end at 11,535.02 points.

The fear-gauge CBOE Volatility Index (VIX) was down 2.05% to 25.76. Only 9.58 million shares were traded on Monday, recording the sixth-lightest trading session of the year.

Focus Shifts Toward Fed Policy Meeting

Stocks swung between gains and losses throughout Monday in a volatile trading session as investors tried to position themselves ahead of the Fed’s all-important policy meeting. Investors now are assured of a steep rate hike, which has been denting their confidence as they now fear a global economic slowdown is almost unavoidable.

The Fed has already hiked interest rates by 225 basis points this year and is expected to raise rates by another 75 basis points in its two-day policy meeting that begins on Tuesday. A brief hope of the Fed going for a not-so-steep rate hike anymore had given investors’ confidence a boost during the summer but that was short-lived.

Fed Chair Jerome Powell had maintained that the Fed will continue with its steep rate hike policy so long it doesn’t get full control over soaring inflation. This dampened the expectation of a less-aggressive rate hike.

Fed to Stick to Aggressive Rate Hikes

Last week, the August CPI index reading showed inflation increased higher than expected which now gives the Fed the cover to go for another steep rate hike this week. Investors have been feeling jittery since then.

On Monday, stocks wavered between gains and losses, with the Dow down 263 points at one time of the day. The S&P 500 and Nasdaq too were at one point down more than 0.9% each.

Fears of another 75-basis point interest rate hike this week pushed the 10-year Treasury yield to cross 3.51% to hit its highest level in 11 years.

Eight of the 11 S&P 500 sectors ended in the green on Monday. Financial stocks were big gainers ahead of Fed’s policy meeting. Shares of Bank of America Corporation (BAC - Free Report) rose 1.7%, while The Goldman Sachs Group, Inc. (GS - Free Report) and Citigroup Inc. (C - Free Report) advanced 0.8% and 0.3%, respectively. Bank of America has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Also, industrials and tech stocks gained on Monday. Shares of Apple Inc. (AAPL - Free Report) gained 2.5%, while Meta Platforms, Inc. (META - Free Report) advanced 1.2%.

No major economic data was released on Monday.

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