U.S. stocks traded mostly lower for a second session on Wednesday ahead of a policy update from the Federal Reserve which will be parsed for clues about the economic outlook and the sustainability of the recent run-up in equities in the aftermath of the COVID-19 pandemic.

While the Dow Jones Industrial Average slipped, led by a drop in Boeing, but the Nasdaq Composite rose to a new intra-day record, led by gains in Amazon, Apple, Alphabet, Facebook and Netflix.

How are benchmarks performing?

The Dow Jones Industrial Average
fell 195 points, or 0.7% lower, to 27,077. The S&P 500
fell 10 points, or 0.3%, to 3,197. The Nasdaq Composite
climbed 51 points, or 0.5%, to 10,005, after reaching a new intraday record after the opening bell.

On Tuesday, the Dow shed 300.14 points, or 1.1%, to end at 27,272.30, snapping its longest win streak, six days, since the eight-session stretch ended Sept. 13, 2019. The S&P 500 index fell 25.21 points, or 0.8%, closing at 3,207.18. The Nasdaq Composite Index advanced 29.01 points, or 0.3%, finishing at a record 9,953.75, after briefly touching an all-time intraday high of 10,002.50.

What’s driving the market?

Investors are awaiting the most recent policy update and a virtual news conference from the rate-setting Federal Open Market Committee led by Chairman Jerome Powell.

Although the central bank isn’t expected to make any significant changes to interest rates or its current batch of programs, investors will be attuned to the Fed’s economic forecasts, particularly after Friday’s U.S. jobs report showed that 2.5 million jobs were created in May compared with expectations for more job losses for the month, while the unemployment rate fell to 13.3% from 14.7% in April.

The Fed’s balance sheet has ballooned from about $4 trillion in March to $7.21 trillion as of last week with its policy interest rate steady at a range of 0% and 0.25%.

Check out:May’s surprising job gain dents view that Fed will stay at zero for years

Those efforts have been widely credited with helping to erase much of the rout in the broader market brought on by the epidemic and the efforts to limit its spread.

“Without stating the obvious, Wednesday’s FOMC decision will determine whether the pause extends a little longer or not,” wrote Stephen Innes, global chief market strategist at AxiCorp, in a daily research note. “If the Fed does not take any further action, risk sentiment might cool its jets for longer,” he said.

The Fed policy statement and a projection of interest rate expectations from FOMC members will be released at 2 p.m. and will be followed by a news conference featuring Powell a half-hour later.

The pullback for the U.S. equity market in the past two sessions, however, reflects some concerns that the trend higher in markets has gotten ahead of the fundamentals of the economy, even as states and cities restart business activity as lockdown protocols are eased. Investors say the catch-up in stocks hurt by the coronavirus crisis could now be running its course, as money returns back to the high-growth companies in the Nasdaq.

“As the deep value bargains disappear, money begins to flow back to where it was most comfortable. And that is the growth stocks,” wrote James Meyer, chief investment officer at Tower Bridge Advisors.

Overnight the Organization for Economic Cooperation and Development said it expected the global economy to contract by 6% this year even if a second wave of infections is avoided, while it forecast a contraction of 7.6% in the face of a resurgence of the novel coronavirus.

Jeff Gundlach, CEO of DoubleLine Capital on Tuesday, during a webcast late Tuesday, warned that stocks may fall off a “lofty” perch, with the S&P 500 index
up 43% from March 23 lows. He added that the Federal Reserve could bring back yield-curve control if long-dated bonds keep gaining, Bloomberg reported.

In economic data, U.S. May consumer price index inflation fell 0.1% in May, marking its third straight decline, while the core gauge stripping out for food and energy prices also fell for a third month in a row. The median estimates from economists surveyed by Econoday is for a month-over-month reading of 0%.

“Headline consumer prices have fallen three straight months in a row, but have somehow managed to avoid falling into negative territory and it looks now with the states reopening that the economy will just miss going into a deflationary spiral,” said Chris Rupkey, chief financial economist at MUFG.

Check out: Here are the biggest stock-market bets among institutional and individual investors, ranked

Which stocks are in focus?
How are other assets trading?

Oil prices traded lower Wednesday morning
West Texas Intermediate declined 99 cents, or 2.4%, to trade at $38.02 a barrel on the New York Mercantile Exchange.

In precious metals, August gold
on Comex edged up $9.40, or 0.6%, to reach $1,731.20 an ounce.

The 10-year Treasury note yield
fell 3.1 basis points to 0.79%. Bond prices move in the opposite direction of yields.

The greenback edged 0.2% lower against its major rivals, as gauged by the ICE U.S. Dollar index

In global equities, the Stoxx Europe 600 index
and the FTSE 100 index
traded flat.

In Asia, Japan’s Nikkei
closed 0.2% higher, the China CSI 300
finished up 0.2% and Hong Kong’s Hang Seng Index
closed in negative territory but virtually unchanged. South Korea’s Kospi index
gained 0.3%.

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