Last Updated 4:05 PM EST
Stock indices finished today’s trading session in the red following today’s FOMC meeting. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 fell 1.55%, 2.51%, and 3.39%, respectively.
The consumer discretionary sector was the session’s laggard, as it fell 3.75%. Conversely, the utilities sector was the session’s leader, with a loss of 0.97%.
Furthermore, the U.S. 10-Year Treasury yield increased to 4.09%, an increase of more than four basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.6%. This brings the spread between them to -51 basis points.
Compared to yesterday, the market is pricing in a higher chance of a lower Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 4.25% to 4.5% increased to 56.8%, which is up from yesterday’s expectations of 44.5%.
In addition, the market is now also assigning a 43.2% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 49.8% chance yesterday.
Stocks Fall as Jerome Powell Speaks
Last Updated 3:00PM 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, the S&P 500, and the Nasdaq 100 are down 0.3%, 1%, and 1.5%, respectively. This comes after Jerome Powell said that rates still have room to climb and that it was too early to talk about pausing rate hikes.
Stocks Turn Positive after Some Dovish Language from the Federal Reserve
Last Updated 2:11PM EST
Stock indices turned positive following today’s FOMC meeting. As of 2:11 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.9%, 0.5%, and 0.4%, respectively. This comes after the Federal Reserve hiked interest rates by an expected 75 basis points, bringing the current Fed Funds rate to a range of 3.75% to 4%.
Growth in spending and production appear to be modest, although inflation remains elevated as the result of supply chain issues. As a result, the central bank is going to keep increasing rate hikes until they reach levels that are sufficiently restrictive.
However, it is going to start taking lags into account. It is generally believed that Federal Reserve policy takes at least six months to impact the economy. As a result, this is a slightly more dovish tone that means that future rate hikes could potentially slow down, or at least that’s how the market is interpreting it at the moment.
Stocks are Negative; Mortgage Rates Fall Week-over-Week
Last Updated 12:00PM EST
Stocks are in the red halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.2%, 0.5%, and 0.9%, respectively.
On Wednesday, the Mortgage Bankers Association released its weekly report for the U.S. 30-Year mortgage rate. The mortgage rate decreased to 7.06% compared to last week’s reading of 7.16%.
Furthermore, the number of mortgage applications decreased week-over-week by -0.5%, following last week’s decrease of -1.7%. This indicates that sentiment in the real estate market is falling, which is consistent with other data that has been released so far.
In addition, mortgage application volume is down substantially on a year-over-year basis, with the Mortgage Market Index at 200.1 compared to 623.8 on November 3, 2021.
Stocks Fall as ADP Nonfarm Employment Change Beats Expectations
Last Updated 10:00AM 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, the S&P 500, and the Nasdaq 100 are down 0.4%, 0.5%, and 0.3%, respectively.
The energy sector (XLE) is the laggard so far, as it is down 1.7%. Conversely, the financial sector (XLF) is the session’s leader with a loss of 0.1%.
On Wednesday, Automatic Data Processing (NASDAQ: ADP) released its Nonfarm Employment Change report, which is the change in non-farm, private employment on a month-over-month basis.
The number came in at 239,000 for the month of October – well above the expected 195,000. This may signal to the Federal Reserve that it has the room to continue tightening aggressively, hence the negative reaction from investors.
However, it’s worth noting that the figures reported by ADP have been on an overall downtrend since the start of 2022. This indicates that hiring is slowing down in the U.S. economy as companies continue to face macroeconomic uncertainties. Therefore, more rate hikes will slow the economy even further.
Futures Up Ahead of Another Interest Rate Hike
First Published 6:45AM EST
Stock futures were mixed on Wednesday morning as investors welcomed the final day of the FOMC meeting. The Federal Reserve is expected to announce another interest rate hike later on Wednesday.
Futures on the Dow Jones Industrial Average (DJIA) lost 0.07%, while those on the S&P 500 (SPX) gained 0.03%, as of 6.32 a.m. EST, Wednesday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 0.15%.
In regular trading Tuesday, the major stock averages ended the day in the red in response to strong job openings data for September. The S&P 500, the Dow, and the Nasdaq 100 ended 0.41%, 0.24%, and 1.02% lower, respectively.
The 10-year U.S. 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, total job openings added by employers in the U.S. rose 437,000 sequentially to 10.7 million, hinting at a slightly slowed but tight labor market. The remarkably resilient labor market did not come as welcome news to investors, who took this to be a cue for tighter monetary policy by the Fed. Notably, slowing down the labor market is one of the things on the Fed’s agenda to stabilize prices.
On Friday, the Labor Department also revealed that employers kept vying for skilled workers through the third quarter, leading to a 5% rise in worker wages and benefits. This is a concern as higher wages put pressure on inflation to increase.
Fed Prepares to Hike Interest Rates Again
As traders brace for another possible 75 basis point rate hike later today, more attention will be given to Fed Chair Jerome Powell’s tone of speech. If the tone is as aggressive as it was during August’s Jackson Hole Economic Symposium, the markets are likely to react negatively. On the other hand, any hint from Powell that the economy is slowing desirably might spark expectations of a slower pace of the Fed’s tightening plans in the coming months. This could lead to a stock market run. However, the latter seems to be unlikely looking at the tight job market.
Moreover, inflation is still likely to be hovering around 8%, which is a far cry from the Fed’s target of 2-3%. This means that the likelihood of a pivot before interest rates are pulled up to at least 4.6%-5% (over the next few months) is very less.
Additionally, Americans increased their spending by 0.6% in September and slowed their pace of saving in the face of higher prices. The spending was more elevated on services such as housing, utilities, and transportation. This data may be considered in the Fed’s policy decision today.
More Data and Earnings Updates to Gauge This Week
On Wednesday, mortgage application data and ADP’s employment report are slated to be released, giving us more details about the housing and labor market amid high mortgage rates and inflation.
On the earnings front, Uber’s (NASDAQ:UBER) solid quarterly report propelled the company’s shares 12% higher.
On Wednesday, big health-care names including CVS Health (NYSE:CVS), Humana (NYSE:HUM), and GlaxoSmithKline (NYSE:GSK) are set to release their quarterly earnings reports before the market opens. Paramount (NASDAQ:PARA)and Yum! Brands (NYSE:YUM) are also expected to report on Wednesday.
