Stocks Drift, Banks Steady Ahead of Fed

NEW YORK (AP) -- Stocks are drifting Wednesday ahead of what Wall Street hopes will be the last hike to interest rates for a long time.

The S&P 500 was up 0.2% in early trading after slumping the prior day. The Dow Jones Industrial Average was down 21 points, or 0.1%, at 33,663, as of 9:45 a.m. Eastern time, while the Nasdaq composite was 0.4% higher.

Eli Lilly rose 3.9% after reporting encouraging results from a study of a treatment for Alzheimer's disease, and bank stocks were recovering some of their steep slide from a day before, while oil prices continued to fall. But the market's spotlight is squarely on the Federal Reserve, which later in the afternoon will announce its latest move to combat high inflation.

The wide assumption is that the Fed will lift its key overnight interest rate again to its highest level since 2007. More important is what clues the Fed gives about upcoming moves.

The hope across Wall Street is that this will mark the end of the Fed's fastest flurry of rate hikes in decades, which would give breathing room to financial markets and the economy. But the Federal Reserve is in a tight spot, with no easy answer.

Higher rates have helped bring inflation down, but it's still too high and hurting households trying to keep up. Lower-income households have been squeezed particularly hard. At the same time, high rates have also sharply weakened swaths of the economy and raised worries about a recession later this year.

The banking system is feeling some of the fiercest pressure of high rates, and three of the four largest U.S. bank failures in history have come within the last two months. Investors have been hunting for other potential weak links, with the harshest scrutiny on small- and medium-sized banks that could see a sudden exodus of customers.

Shares of PacWest Bancorp, Western Alliance Bancorp and other rivals were rising Wednesday, a day after seeing trading of their stocks get halted amid steep slides. PacWest rose 7.7%, Western Alliance gained 5% and Zions Bancorp. rose 3.2%.

Some of the market's sharpest action was among companies reporting their results for the first three months of the year.

Kraft Heinz rallied 4.4% after beating analysts' forecasts for profit and revenue. Online dating company Match Group jumped 4.7% after topping profit expectations.

The majority of companies have been turning in better profits than feared so far. But expectations coming into this reporting season were low given the effects of much higher interest rates and slowing economy. S&P 500 companies are still likely on the way to reporting a second straight quarter of profit drops.

That's why much attention has been on what companies say about upcoming trends.

Advanced Micro Devices fell 8.5% despite reporting stronger profit and revenue than expected. It gave a forecast for revenue in the current quarter that fell short of some analysts' expectations.

Oil prices were sliding amid worries about how much fuel a slowing global economy will burn. Benchmark U.S. crude oil fell 3.7% to $68.99 per barrel and is only a few dollars above its lowest point since late 2021.

Brent crude, the international standard, was down 3.1% at $72.95 per barrel. That sent energy stocks to the sharpest loss by far among the 11 sectors that make up the S&P 500. Devon Energy and Diamondback Energy both dropped 2.6%.

Several reports have recently shown weakening trends across the U.S. economy, and more updates will arrive later in the morning about the health of services industries.

A report earlier Wednesday morning suggested the job market may be in better shape than expected. ADP said hiring among private employers accelerated much more than economists forecast last month. It could raise expectations for the federal government's more comprehensive report on hiring, which will arrive Friday.

The job market has been one of the strongest pillars supporting the economy recently, though some mixed data has arrived recently to suggest it may be softening. On one hand, the Fed sees that as helpful in bringing inflation closer to its goal of 2%. On the other, though, a drop-off would sharply raise the risk of a recession.

In the bond market, the yield on the 10-year Treasury fell to 3.39% from 3.44% late Tuesday.

The two-year yield, which moves more on expectations for the Fed, fell to 3.94% from 3.99%.