Stocks finished higher on Tuesday as attention shifts to monetary policy.
The Dow and broader U.S. stock market continued higher on Tuesday, as investors awaited a dovish policy statement from the Federal Reserve on Wednesday.
Two of Wall Street’s major indices finished in positive territory, with the Dow Jones Industrial Average (DIA) the lone laggard. The benchmark flat-lined at 27,994.42.
The broad S&P 500 Index (SPY) of large-cap stocks gained 0.5% to close at 3,401.11. Eight of 11 primary sectors reported gains, with communication services leading the pack. Shares of information technology and discretionary companies also rose sharply.
Meanwhile, the technology-focused Nasdaq Composite Index (QQQ) climbed 1.2% to settle at 11,190.32.
A measure of implied volatility known as the CBOE VIX (VXX) edged slightly lower on Tuesday but continued to trade above the historical average. The so-called “investor fear index” bottomed at 24.92 before recovering at 25.80.
Members of the Federal Open Market Committee (FOMC) kicked off their two-day policy meeting on Tuesday, with an official interest-rate decision scheduled for Wednesday afternoon. The FOMC is likely to reinforce its dovish stance on monetary policy after Jerome Powell indicated last month that inflation will be allowed to overshoot its 2% target.
The Fed’s official policy statement will be accompanied by a quarterly summary of economic projections and inflation forecasts.
In economic data, U.S. industrial production rose 0.4% in August, the Federal Reserve reported Tuesday. Capacity utilization increased to 71.%, official data showed.
The Final Word: The Fed is expected to keep interest rates at record lows until 2023, according to a recent survey of economists by CNBC. The highly accommodative landscape could provide more fuel to the equities rally despite overvaluation risks.