- The stock market's unrelenting climb propelled major US indexes to new all-time highs just a day before the Federal Reserve's policy announcement.
- Profit margins have held up exceptionally well, despite rising commodity prices and supply-chain snarls, underpinning that strength. Many businesses have been able to pass on higher prices to customers, with the majority of them outperforming earnings expectations. Regardless of what the Fed says or does on Wednesday, there is a belief that the US will continue to have low-interest rates, which is good for equities.
- Treasury two-year yields joined a global drop in short-term rates triggered by the Australian central bank's dovish speech released just a day before the Fed decision. With the Federal Reserve likely to begin winding down its asset-purchase program soon, analysts polled by Bloomberg are split on whether a rate hike would occur next year or in early 2023.
- Technical indicators are indicating further volatility following the recent equities rise. The S&P 500 is not only testing the limits of its trading envelope, which is based on moving price averages, but the expansion of its upper and lower bands can also signal larger swings. Furthermore, the gauge's 14-day relative strength index is around 70, which some traders believe to be an overbought barrier.
