Stock Market Wobbles as Fed Meeting Looms

The US stock market has had a wobbly week, but major indexes remain in positive territory. The S&P 500 is up over 8% for the year so far, despite recent declines driven by steep falls in Alphabet's shares following its quarterly report.

Alphabet's slump was attributed to an increase in its AI spending plans, which set a negative tone ahead of results from other AI 'hyperscalers' including Microsoft, Amazon, and Meta Platforms. These companies have been at the heart of equity market gains this year, helping drive the bull market near its fourth year.

The Federal Reserve's meeting is expected to shed light on interest rate policy, with the central bank holding rates steady when it gives its monetary policy statement on Wednesday. However, oil prices have shot up due to escalating tensions in the Middle East, causing fears that policymakers will need to be more aggressive in raising rates to control inflation.

Kristina Hooper, chief market strategist at Man Group, noted that 'investors are walking on eggshells' and are likely to react negatively to any signs of imperfection. This cautionary view is supported by the fact that Fed funds futures price in a 38% chance of a quarter-percentage-point rate increase.