US stocks closed out a second straight session of thin trading yesterday, with investors reluctant to make big bets ahead of a crucial meeting of the European Central Bank, which could announce new policies to help contain the Eurozone’s debt crisis.
Media reports that European policymakers would unveil a bond-buying plan to bring down crippling borrowing costs in Eurozone economies boosted sentiment, but it wasn’t enough to drive gains in stocks.
Shares opened lower, hurt by FedEx, which late on Tuesday cut its quarterly profit outlook on weakness in the global economy.
FedEx is considered an economic bellwether because of its role as the No2 world shipping company. The stock fell two per cent to $85.80, United Parcel Service fell 2.4 per cent to $71.94 and the Dow Jones Transportation index lost 1.1 per cent.
“While FedEx is only one company, it’s one whose warning is indicative of the global economic slowdown we’re dealing with,” said Leo Grohowski, chief information officer at BNY Mellon Wealth Management in New York.
Equities seesawed between positive and negative territory throughout the session. About 5.49bn shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year’s daily average of 7.84bn in a sign of investor caution.
Central Bank sources told Reuters the ECB was ready to waive seniority status on government bonds it buys under a new program which it is set to agree on at today’s Governing Council meeting.
Bloomberg earlier reported that the ECB would, with broad support from its council members, unveil an unlimited, sterilised programme of bond purchases. The ECB has been expected to be cautious about disclosing the size of its bond-buying, given opposition from Germany’s central bank.
Further details of the plan will be revealed by ECB President Mario Draghi after today’s meeting, but some analysts cautioned the ECB may opt to wait until after the German constitutional court rules on the region's bailout funds on 12 September to announce any new steps.
“While some of the rhetoric coming out of Europe has been positive, we'll need to see follow-through in actions now,” said Grohowski, who helps oversee $171bn in client assets.
The Dow Jones industrial average was up 11.54 points, or 0.09 per cent, at 13,047.48. The Standard & Poor’s 500 Index was down 1.51 points, or 0.11 per cent, at 1,403.43. The Nasdaq Composite Index was down 5.79 points, or 0.19 per cent, at 3,069.27.