Last updated at 4:05 PM EST
Stock indices ended today’s trading session in the red after today’s FOMC meeting. The Dow Jones Industrial Average, S&P 500 and Nasdaq 100 fell 1.55%, 2.51% and 3.39% respectively.
The Consumer Discretionary sector lagged the session, falling 3.75%. Conversely, the utilities sector was the leader of the session, with a loss of 0.97%.
Additionally, the 10-year US Treasury yield rose to 4.09%, an increase of more than four basis points. Similarly, the two-year Treasury yield also rose, hovering around 4.6%. This brings the gap between them to -51 basis points.
Compared to yesterday, the market is pricing in a higher probability of a Fed Funds rate cut for the end of the year. In fact, market expectations for a rate in the range of 4.25% to 4.5% have risen to 56.8%, up from yesterday’s expectation of 44.5%.
Additionally, the market now also assigns a probability of 43.2% to a range of 4.5% to 4.75%. For reference, investors gave themselves a 49.8% chance yesterday.
Stocks fall as Jerome Powell speaks
Last Updated 3:00 PM EST
Stock indices turned negative after initially surging following today’s FOMC meeting. As of 3:00 p.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are down 0.3%, 1% and 1.5%, respectively. It comes after Jerome Powell said rates could still rise and it was too early to talk about pausing rate hikes.
Stocks turn positive after dovish language from the Federal Reserve
Last updated at 2:11 PM EST
Stock indices turned positive after today’s FOMC meeting. As of 2:11 p.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are up 0.9%, 0.5% and 0.4%, respectively. This comes after the Federal Reserve raised interest rates by about 75 basis points, bringing the current Fed Funds rate to a range of 3.75% to 4%.
Spending and output growth appear to be modest, although inflation remains elevated due to supply chain issues. As a result, the central bank will continue to increase rate hikes until they reach sufficiently binding levels.
However, it will start taking offsets into account. It is widely believed that Federal Reserve policy takes at least six months to have an impact on the economy. Therefore, it’s a bit more dovish tone that means future rate hikes could potentially slow down, or at least that’s how the market is interpreting it right now.
Inventories are negative; Mortgage rates fall week over week
Last Updated 12:00 PM EST
Stocks are in the red midway through today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are down 0.2%, 0.5% and 0.9%, respectively.
On Wednesday, the Mortgage Bankers Association released its weekly US 30-year mortgage rate report. The mortgage rate fell to 7.06% from last week’s reading of 7.16%.
In addition, the number of mortgage applications declined week over week by -0.5%, following the -1.7% decline recorded last week. This indicates that sentiment in the housing market is declining, which is consistent with other data released so far.
Additionally, the volume of mortgage applications declined significantly year-over-year, with the mortgage market index standing at 200.1 from 623.8 as of November 3, 2021.
Stocks fall as ADP non-farm payrolls shift beats expectations
Last updated at 10:00 a.m. EST
Stock indices are in the red 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are down 0.4%, 0.5% and 0.3%, respectively.
The energy sector (XLE) is lagging so far, down 1.7%. Conversely, the financial sector (XLF) is the leader of the session with a loss of 0.1%.
Wednesday, Automatic Data Processing (NASDAQ: ADP) published its report on the evolution of non-agricultural employment, which shows the evolution of non-agricultural private employment on a monthly basis.
The number stood at 239,000 for the month of October – well above the 195,000 expected. This may signal to the Federal Reserve that it has room to continue its aggressive tightening, hence the negative reaction from investors.
However, it should be noted that the numbers released by ADP have been trending down overall since the start of 2022. This indicates that hiring is slowing in the US economy as businesses continue to grapple with macroeconomic uncertainties. Therefore, further rate hikes will slow the economy even further.
Futures rise ahead of another interest rate hike
First published at 6:45 a.m. EST
Equity futures were mixed on Wednesday morning as investors greeted the final day of the FOMC meeting. The Federal Reserve is expected to announce another interest rate hike later on Wednesday.
Futures contracts on the Dow Jones Industrial Average (DJIA) lost 0.07%, while those of the S&P 500 (SPX) gained 0.03%, as of 6:32 a.m. EST Wednesday. Meanwhile, the Nasdaq 100 (NDX) futures were up 0.15%.
In regular trading on Tuesday, major stock averages ended the day in the red in response to strong jobs data for September. The S&P 500, Dow Jones and Nasdaq 100 ended down 0.41%, 0.24% and 1.02% respectively.
The 10-year US Treasury yield also slipped to 4.052% on Tuesday from 4.074% on Monday, offsetting some of the day’s losses in the stock market.
Labor market still tight
On Tuesday, the Labor Department revealed that in September, the total number of job openings added by employers in the United States increased by 437,000 sequentially to 10.7 million, hinting at a market. slightly slowed down but tense work. The remarkable resilience of the labor market was not good news for investors, who saw it as a sign of tightening monetary policy by the Fed. Notably, the labor market slowdown is one of the things on the Fed’s agenda to stabilize prices.
On Friday, the Labor Department also revealed that employers remained in the running for skilled workers throughout the third quarter, resulting in a 5% increase in wages and benefits for workers. This is a concern as higher wages pressure inflation to rise.
The Fed is preparing to raise interest rates again
As traders brace for another possible 75 basis point rate hike later today, more attention will be paid to the tone of Fed Chairman Jerome Powell’s speech. If the tone is as aggressive as it was at the Jackson Hole economic symposium in August, markets will likely react negatively. On the other hand, any hint from Powell that the economy is slowing in a desirable way could spark expectations of a slower pace of Fed tightening plans in the months ahead. This could lead to a stock run. However, the latter seems unlikely given the tight labor market.
Moreover, inflation should still hover around 8%, which is far from the Fed’s 2-3% target. This means that the likelihood of a pivot before interest rates are pulled up to at least 4.6% to 5% (over the next few months) is very low.
In addition, Americans increased their spending by 0.6% in September and slowed their rate of savings in the face of rising prices. Spending was higher on services such as housing, utilities and transportation. This data may factor into the Fed’s policy decision today.
More data and earnings updates to assess this week
On Wednesday, mortgage applications data and ADP’s employment report are expected to be released, giving us more details on the housing and labor market amid high mortgage rates and inflation.
On the profit side, Uber (NASDAQ: UBER) a strong quarterly report sent the company’s shares up 12%.
On Wednesday, big names in health, including CVS Health (New York Stock Exchange: CVS), Human (NYSE: HUM) and GlaxoSmithKline (NYSE: GSK) are expected to release their quarterly earnings reports before the market opens. primordial (NASDAQ: PARA) and yum! Brands (NYSE: YUM) are also expected to report on Wednesday.