Stock markets shy away from major moves amid Fed meeting

North American stock markets were little changed Tuesday, as traders played it safe amid the latest meeting of the U.S. Federal Reserve.

In Toronto, the S&P/TSX composite index was up a modest 51.90 points to 14,550, propelled by gains in the gold and mining sectors.

It was a similarly lukewarm mood on Wall Street with the Dow Jones industrial average losing 19.31 points at 18,473.75, while the broader S&P 500 composite index gained 0.70 of a point at 2,169.18. The Nasdaq composite added 12.42 points to 5,110.05.

These marketplace movements occurred as the Fed kicked off its two-day policy meeting on Tuesday.

Economists do not expect the U.S. central bank to raise interest rates from their current level of 0.25 per cent to 0.5 per cent, but will be looking for any signals from policy-makers on whether a hike will occur later this year.

Ben Jang, a portfolio manager with Vancouver-based Nicola Wealth Management, said the likelihood that the Fed will raise rates following this meeting is pretty non-existent.

“The market is pricing at a 10 per cent chance of a hike (Wednesday). It’s really negligible,” said Jang.

“I don’t think they’ll do anything until next year.”

Even though some economic indicators have come in strong enough to support a rate hike, Jang said, he believes there are still too many uncertainties including the upcoming U.S. presidential election in November.

The bank had initially forecasted four rate hikes in 2016, but has yet to move on any of them.

The risk, notes Jang, is that stock markets are getting used to operating in this type of environment, so when a raise does come, it has the potential to spark a sharp sell-off.

“The Fed knows that they need to hike rates but they also know they can’t do it quickly,” he said. “It’s just a matter of timing.”