Traders Looking Ahead To Federal Reserve’s Monetary Policy Announcement

The major U.S. index futures are currently pointing to a narrowly mixed open on Wednesday as traders look ahead to the Federal Reserve’s monetary policy announcement.

Traders may stick to the sidelines as they await the Fed’s latest monetary policy decision, which is due to be announced at 2 pm ET.

The Fed is expected to announce plans to begin gradually scaling back its $120 billion in monthly bond purchases by mid-November or December.

Since tapering is widely expected, traders may pay closer attention to the language of the accompanying statement as they look for clues about the outlook for interest rates.

Traders are also likely to keep an eye on the post-meeting press conference by Fed Chair Jerome Powell, which is set for 2:30 pm ET.

Meanwhile, the futures have not shown much reaction to a report from payroll processor ADP released showing private sector employment in the U.S. increased by more than expected in the month of October.

Stocks moved mostly higher over the course of the trading day on Tuesday, with the major averages once again reaching new record closing highs. The continued strength on the day came even as traders looked ahead to the Fed’s monetary policy announcement.

The major averages all finished the day moderately higher. The Dow advanced 138.79 points or 0.4 percent to 36,052.63, the Nasdaq rose 53.69 points or 0.3 percent to 15,649.60 and the S&P 500 climbed 16.98 points or 0.4 percent to 4,630.65.

The strength that emerged on Wall Street partly reflected recent upward momentum, as traders reacted to another batch of upbeat earnings news.

Athletic apparel maker Under Armour (UAA) moved sharply higher after reporting third quarter earnings that exceeded analyst estimates and raising its full-year outlook.

Shares of Pfizer (PFE) also showed a strong move to the upside after the drugmaker reported better than expected third quarter results and raised its full-year guidance.

Chemical maker DuPont (DD) also posted a standout gain after reporting third quarter results that exceeded expectations.

DuPont also announced an agreement to acquire materials technology company Rogers Corp. (ROG) for $5.2 billion in cash.

Overall trading activity was somewhat subdued, however, as traders were reluctant to make more significant moves ahead of the Fed announcement.

A lack of major U.S. economic data also kept some traders on the sidelines ahead of the release of the Labor Department’s closely watched monthly jobs report on Friday.

Transportation stocks moved sharply higher on the day, driving the Dow Jones Transportation Average up by 6.9 percent to a record closing high.

Shares of Avis Budget (CAR) led the sector higher, skyrocketing by 108.3 percent after the car rental company reported better than expected third quarter results.

Substantial strength was also visible among networking stocks, as reflected by the 3.9 percent spike by the NYSE Arca Networking Index. The index also reached a new record closing high.

Arista Networks (ANET) soared after the networking company reported better than expected third quarter results and provided upbeat guidance. Arista also announced a $1 billion share repurchase program and a four-for-one stock split.

Computer hardware stocks also turned in a strong performance on the day, resulting in a 2.4 percent jump by the NYSE Arca Computer Hardware Index.

Chemical, semiconductor and pharmaceutical stocks also moved notably higher, while steel, oil and housing stocks moved to the downside.

Commodity, Currency Markets

Crude oil futures are plunging $1.95 to $81.96 a barrel after edging down $0.14 to $83.91 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,786.60, down $2.80 compared to the previous session’s close of $1,789.40. On Tuesday, gold fell $6.40.

On the currency front, the U.S. dollar is trading at 113.83 yen compared to the 113.96 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1586 compared to yesterday’s $1.1579.

Asia

Asian stocks ended broadly lower on Wednesday as investors adopted a cautious approach ahead of the U.S. Federal Reserve’s monetary policy announcement due later in the day.

Amid soaring inflation across the globe due to rising demand and supply bottlenecks, the U.S. central bank is expected to announce its stimulus tapering timeline. The Japanese stock market was closed in observance of Culture Day.

Chinese shares ended slightly lower as new locally transmitted COVID-19 cases in the country spiked to a nearly three-month high and Premier Li Keqiang warned of downward economic pressure. Traders also looked ahead to a major Chinese Communist Party gathering to be held November 8-11.

The benchmark Shanghai Composite Index slipped 7.09 points, or 0.2 percent, to close at 3,498.54, while Hong Kong’s Hang Seng Index dropped 74.92 points, or 0.3 percent, to 25,024.75.

Growth in the Chinese services sector accelerated in October, the latest survey from Caixin showed earlier in the day, with a services PMI score of 53.8. That was up from 53.4 in September as new business expanded at a stronger rate at the start of the fourth quarter. The composite index ticked up to 51.5 from 51.4 in September.

Australian markets rallied after RBA Governor Philip Lowe said he has no plans to hike rates next year. The benchmark S&P/ASX 200 Index climbed 68.40 points, or 0.9 percent, to 7,392.70, while the broader All Ordinaries Index ended up 66.40 points, or 0.9 percent, at 7,713.

Commonwealth Bank of Australia shares rose 1.2 percent after the lender said it would offer retail clients crypto services. ANZ jumped 2.3 percent and NAB added 1.4 percent.

Miners rebounded, with heavyweights BHP and Rio Tinto ending up over 1 percent each. Smaller rival Fortescue Metals Group jumped 3.1 percent. Energy stocks ended mixed, with Whitehaven Coal surging 3.8 percent.

Seoul stocks tumbled, with the Kospi ending down 37.78 points, or 1.3 percent, at 2,975.71 as investors awaited clues on the timeline for tapering from this week’s FOMC meeting.

Market bellwether Samsung Electronics lost 1.54 percent, No. 2 chipmaker SK Hynix declined 1.9 percent and internet portal operator Naver gave up 1.8 percent.

Europe

European stocks are little changed in cautious trading on Wednesday ahead of an expected tapering of pandemic-era stimulus by the U.S. Federal Reserve.

While the French CAC 40 Index is up by 0.1 percent, the German DAX Index is just below the unchanged line and the U.K.’s FTSE 100 Index is down by 0.4 percent.

Higher metal prices has helped lift miners, with Anglo American, Antofagasta and Glencore posting notable gains.

German carmaker BMW has shown a modest move to the upside after reporting higher quarterly profits.

Airline Lufthansa has surged as it returned to profit for the first time since the coronavirus crisis. Software firm TeamViewer has also moved sharply higher after confirming its outlook.

On the other hand, BP Plc and Royal Dutch Shell have slid as oil prices fall on data pointing to a big build in crude oil and distillate stocks in the United States.

Vestas, the world’s largest maker of wind turbines, has plunged after it reported a drop in its profitability margin for the third quarter of 2021 due to supply chain instability and cost inflation of materials.

Clothing retailer Next Plc has also shown a notable move to the downside after maintaining its full-year profit forecast.

In economic news, U.K. house prices grew 9.9 percent year-on-year in October following a 10 percent increase in September, data from Nationwide Building Society showed. Economists had forecast the growth rate to ease to 9.3 percent.

On a monthly basis, house prices advanced 0.7 percent after rising 0.2 percent in September. Prices were expected to climb 0.4 percent.

U.S. Economic Reports

Payroll processor ADP released a report on Wednesday showing private sector employment in the U.S. increased by more than expected in the month of October.

ADP said private sector employment jumped by 571,000 jobs in October after surging by a revised 523,000 jobs in September.

Economists had expected private sector employment to climb by 400,000 jobs compared to the addition of 568,000 jobs originally reported for the previous month.

At 10 am ET, the Institute for Supply Management is scheduled to release its report on activity in the service sector in the month of October.

The ISM’s services PMI is expected to inch up to 62.0 in October from 61.9 in September, with a reading above 50 indicating growth in the sector.

The Commerce Department is also due to release its report on new orders for manufactured goods in the month of September at 10 am ET. Factory orders are expected to edge down by 0.1 percent.

At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended October 29th.

Crude oil inventories are expected to increase by 1.6 million barrels after falling by 4.3 million barrels in the previous week.

The Federal Reserve is due to announce its latest monetary policy decision at 2 pm ET, following by Fed Chair Jerome Powell’s post-meeting press conference at 2:30 pm ET.

Stocks In Focus

Shares of Bed Bath & Beyond (BBBY) are soaring in pre-market trading after the housewares retailer announced an online and in-store partnership with Kroger (KR) as well as an accelerated stock buyback plan, triggering a suspected “short squeeze.”

Ride-hailing service Lyft (LYFT) is also likely to see significant strength after reporting an unexpected third quarter profit on revenues that exceeded analyst estimates.

On the other hand, shares of Zillow Group (Z, ZG) are seeing considerable pre-market weakness after the real estate company reported an unexpected third quarter loss and announced plans to wind down its home flipping business.

Video game maker Activision Blizzard (ATVI) may also come under pressure after reporting better than expected third quarter earnings but providing disappointing guidance and delaying the launch of two games.