U.S. Stocks Turning In Lackluster Performance As Fed Announcement Looms

After climbing to new record highs in the previous session, stocks are turning in a relatively lackluster performance in morning trading on Wednesday. The major averages are showing modest moves as traders look ahead to the Federal Reserve’s monetary policy announcement.

Currently, the major averages are turning in a mixed performance. While the Nasdaq is up 12.35 points or 0.1 percent at 15,661.95, the Dow is down 97.54 points or 0.3 percent at 35,955.09 and the S&P 500 is down 5.90 points or 0.1 percent at 4,624.75.

Traders seem reluctant to make significant moves 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, traders have largely shrugged off 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.

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.

“The job market is revving back up as the Delta-wave of the pandemic winds down,” said Mark Zandi, chief economist of Moody’s Analytics.

“Job gains are accelerating across all industries, and especially among large companies,” he added. “As long as the pandemic remains contained, more big job gains are likely in coming months.”

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.

Economists currently expect employment to jump by 425,000 jobs in October after rising by 194,000 jobs in September, while the unemployment rate is expected to edge down to 4.7 percent from 4.8 percent.

A separate report released by the Institute for Supply Management showed growth in U.S. service sector activity accelerated to a new record high in the month of October.

The ISM said its services PMI climbed to 66.7 in October from 61.9 in September, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 62.0.

Transportation stocks are giving back ground after moving sharply higher in the previous session, with the Dow Jones Transportation Averages slumping by 2.1 percent after spiking by 6.9 percent to a record closing high on Tuesday.

Shares of Avis Budget (CAR) are showing a notable move to the downside after more than doubling in the previous session.

Significant weakness has also emerged among gold stocks, as reflected by the 1.7 percent drop by the NYSE Arca Gold Bugs Index.

The weakness in the gold sector comes amid a steep drop by the price of the precious metal, with gold for December delivery tumbling $25.30 to $1,764.10 an ounce.

On the other hand, networking stocks are seeing continued strength on the day, with the NYSE Arca Networking Index climbing by 1 percent to a new record intraday high.

Tobacco, computer hardware and housing stocks have also moved to the upside on the day, offsetting the weakness seen in the aforementioned sectors.

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance, with the Japanese markets closed for a holiday. China’s Shanghai Composite Index dipped by 0.2 percent, while Australia’s S&P/ASX 200 Index advanced by 0.9 percent.

The major European markets have also turned mixed on the day. While the French CAC 40 Index is up by 0.3 percent, the German DAX Index is down by 0.2 percent and the U.K.’s FTSE 100 Index is down by 0.5 percent.

In the bond market, treasuries have moved modestly lower over the course of the session after seeing initial strength. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.4 basis points at 1.563 percent.