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U.S. stocks indecisive amid weak growth outlook and rate hike talk

Published 10/04/2016, 11:53 AM
© Reuters.  Wall Street trades flat in choppy trade after IMF growth cut and hawkish Fed remarks
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Investing.com – Wall Street registered choppy trade on Tuesday in a session with no major economic data, as investors weighed a weak outlook from the International Monetary Fund (IMF) and digested hawkish comments from a Federal Reserve (Fed) official.

At 11:50AM ET (15:50GMT), the Dow Jones inched up 2 points, or 0.01%, while the S&P 500 slipped 1 point, or 0.06%, and the tech-heavy Nasdaq Composite traded up 8 points, or 0.16%.

The IMF slashed its forecast for U.S. economic growth in 2016 to 1.6% from the prior 2.2% on the back of a first weak half to the year.

The decision was in a context wherein the Fund saw weakness in the advanced economies, but reiterated its global growth forecast of 3.1% for 2016.

The projection for the U.S. was much weaker than recent estimates from both the Atlanta and New York Fed that coincide with growth of 2.2% for this year.

Richmond Fed president Jeffrey Lacker, a known hawk and non-voter on the policy decision committee this year, also hit sentiment in a speech delivered Tuesday.

Lacker thought there was strong case for a “pre-emptive” hike now and argued that current levels of inflation and unemployment would, historically, warrant interest rates of at least 1.5%, compared to the current range of 0.25% to 0.50%.

In a posterior Q&A, Lacker noted that, had he had the right to vote this year, he would have also dissented along with his three colleagues due to his belief that the Fed should return to policy normalization.

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The Richmond Fed chief’s remarks initially sent the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, to an intraday high, while pulling gold down to session lows.

Market expectations for a Fed rate hike also moved upwards, with odds for a November increase at 13.4%, compared to 9.3% a day earlier, according to Investing.com's Fed Rate Monitor Tool.

Fed fund futures also noted a rise in the probability of an end-of-the-year hike to 63.0%, from 61.2% on Monday.

Chicago Fed head Charles Evans was also set to deliver remarks after the market close at 8:00PM ET (2:00GMT Wednesday).

In U.S. company news, Darden Restaurants (NYSE:DRI) gained close to 1% after reporting fiscal first quarter earnings and increasing its forecast for full fiscal year profit.

Micron Technology Inc (NASDAQ:MU) was set to report quarterly earnings after the close.

In M&A, Salesforce.com (NYSE:CRM) acquired ad-data firm Krux in a deal worth approximately $500 million.

Still ahead, Alphabet (NASDAQ:NASDAQ:GOOGL) Inc's Google is expected to unveil new smartphones at an event later on Tuesday.

Meanwhile, oil prices registered choppy trade on Tuesday as market participants weighed increasing production in Nigeria, Libya and Iran against the possibility of an agreement among major oil producers to curb production.

Russian energy minister Alexander Novak reportedly stated on Tuesday that he would be soon be announcing the planned October meeting date with his Saudi counterpart to discuss the issue.

Investors were also on edge ahead of key weekly crude inventory data with the American Petroleum Institute set to report its numbers later in the session and ahead of the official data on Wednesday amid expectations for a build of 2.7 million barrels.

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U.S. crude oil futures gained 0.27% to $48.94 by 11:52AM ET (15:52GMT), while Brent oil rose 0.51% to $51.19.

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