The major U.S. index futures are currently pointing to a modestly lower open on Wednesday, with stocks likely to give back ground after moving mostly higher over the two previous sessions.
Traders may look to cash in on the recent strength in the markets ahead of the Federal Reserve’s monetary policy announcement this afternoon.
With the Fed widely expected to leave interest rates unchanged, traders will pay close attention to the accompanying statement for clues about the outlook for rates.
CME Group’s FedWatch Tool is currently indicating a 99.2 percent chance the Fed will leave rates unchanged today and a 74.6 percent chance rates will remain unchanged in December.
“The Fed is still wary of letting their guard down too early after missing their inflation target badly in the last few years,” said Bill Adams, Chief Economist for Comerica Bank.
He added, “They are likely to signal tomorrow that they are prepared to raise interest rates again if inflation strays from its current downward trajectory.”
On the U.S. economic front, a report released by payroll processor ADP on Wednesday showed private sector employment in the U.S. increased by less than expected in the month of October.
ADP said private sector employment climbed by 113,000 jobs in October after rising by 89,000 jobs in September. Economists had expected employment to jump by 150,000 jobs.
Meanwhile, the Treasury Department announced it intends to continue gradually increasing coupon auction sizes in the upcoming November 2023 to January 2024 quarter.
The Treasury said it plans to auction $112 billion worth of long-term securities next week, including $48 billion worth of three-year notes, $40 billion worth of ten-year notes and $24 billion worth of thirty-year bonds.
In a letter, Treasury officials said the recent increase in treasury yields is “partially a response to stronger-than-expected activity and labor market data.”
After recovering from an initial move to the downside, stocks moved mostly higher over the course of the trading session on Tuesday. The major averages climbed well off their early lows and firmly into positive territory.
The major averages finished the day near their best levels of the session. The Dow rose 123.91 points or 0.4 percent to 33,052.87, the Nasdaq climbed 61.76 points or 0.5 percent to 12,851.24 and the S&P 500 advanced 26.98 points or 0.7 percent to 4,193.80.
The early weakness on Wall Street partly reflected a negative reaction to a report from the Labor Department showing employment costs jumped by slightly more than expected in the third quarter.
The Labor Department said its employment cost index shot up by 1.1 percent in the third quarter compared to economist estimates for a 1.0 percent advance.
However, the report also showed the annual rate of growth by the employment cost index slowed to 4.3 percent in the third quarter from 4.5 percent in the second quarter.
Selling pressure waned shortly after the start of trading, as traders seemed reluctant to make significant moves ahead of the Federal Reserve’s monetary policy announcement.
The subsequent rebound by stocks came as traders resumed yesterday’s bargain hunting, as stocks remain at relatively reduced levels despite the rally seen in the previous session.
Networking stocks showed a substantial rebound on the day, with the NYSE Arca Networking Index surging by 2.7 percent after tumbling to its lowest closing level in well over a year on Monday.
Arista Networks (ANET) led the way back to the upside after the cloud networking solutions company reported third quarter results that beat expectations on both the top and bottom lines.
Considerable strength also emerged among commercial real estate stocks, resulting in a 1.8 percent jump by the Dow Jones U.S. Real Estate Index.
Housing, banking and telecom stock also turned in strong performances, while gold and airline stocks showed notable moves to the downside.
Within the airline sector, shares of JetBlue (JBLU) plummeted after the airline reported third quarter results that fell short of analyst estimates.
Commodity, Currency Markets
Crude oil futures are jumping $1.72 to $82.74 a barrel after slumping $1.29 to $81.02 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,994.20, down $0.10 compared to the previous session’s close of $1,994.30. On Tuesday, gold fell $11.30.
On the currency front, the U.S. dollar is trading at 151.20 yen compared to the 151.68 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0544 compared to yesterday’s $1.0575.
Asia
Asian stocks rose broadly on Wednesday, with Japanese markets leading regional gains after the Bank of Japan loosened its grip on government bond yields.
Middle East worries persisted and Chinese manufacturing data disappointed, helping limit overall gains in the region.
Purchasing managers’ indexes (PMIs) for China, Japan, South Korea and Australia showed activity shrinking.
Copper prices weakened on a firm dollar as traders awaited the Federal Reserve’s interest rate decision later in the day, with no changed expected.
Gold slipped slightly on dollar strength and amid elevated Treasury yields, while oil recovered some ground ahead of the Fed and Bank of England meetings.
Chinese shares ended on a positive note despite signs of a lackluster economic recovery.
The benchmark Shanghai Composite Index inched up by 0.1 percent to 3,023.08 as the government announced plans to set up a mechanism for resolving local debt risks and managing government debt.
Hong Kong’s Hang Seng index finished marginally lower at 17,101.78 as a private survey showed China’s manufacturing activity contracted in October.
China’s Caixin/S&P Global manufacturing PMI fell to 49.5 in October from 50.6 in September, marking the first contraction since July and missing analysts’ forecasts of 50.8.
Japanese shares rallied and the yen held near one-year lows against the dollar after the country’s central bank refrained from major changes to stimulus settings a day earlier.
The Nikkei 225 Index jumped 2.4 percent to 31,601.65, marking a two-week closing high. The broader Topix Index soared 2.5 percent to 2,310.68.
Automaker Toyota Motor surged 4.7 percent after nearing tripling its second-quarter profit and raising its full-year earnings guidance.
Seoul stocks posted strong gains, with the Kospi climbing 1.0 percent to 2,301.56 as data showed October exports climbed an annual 5.1 percent after a year of declines.
Australian markets rose notably led by mining and energy stocks. The benchmark S&P/ASX 200 Index advanced 0.9 percent to 6,838.30 as data showed house prices in the country rebounding to near-record high.
The broader All Ordinaries Index settled 0.8 percent higher at 7,024.60 ahead of the RBA meeting on November 7.
Europe
European stocks are turning in a lackluster performance on Wednesday as traders await the Federal Reserve’s monetary policy announcement this afternoon.
Currently, the German DAX Index, the French CAC 40 Index and the U.K.’s FTSE 100 Index are all up by 0.1 percent.
In corporate news, Wolters Kluwer NV shares were down nearly 4 percent. The Netherlands-based information, software and services company said that adjusted operating profit for the first nine months of the year declined 2 percent in constant currencies.
Skanska plunged more than 11 percent. The Swedish builder reported third-quarter operating earnings well below market expectations as a result of weak property markets.
ASOS plunged 10 percent in London after the embattled fast fashion retailer posted a near £300m annual loss.
Aston Martin Lagonda plummeted 14 percent. The luxury carmaker lowered its 2023 volume outlook for the DB12 model after posting a wider-than-expected third-quarter loss.
Neste fell more than 1 percent after the Finnish refiner announced plans to cut 400 jobs in a cost cutting drive.
Meanwhile, Barry Callebaut, the world’s biggest chocolate maker, surged 4.2 percent after updating its mid-term volume target.
British clothing and homeware group Next rallied 3.4 percent after raising its profit guidance for the fourth time so for this fiscal year.
Likewise, pharmaceutical giant GSK rose about 1 percent after upgrading its financial guidance for the second time this year.
U.S. Economic Reports
A report released by payroll processor ADP on Wednesday showed private sector employment in the U.S. increased by less than expected in the month of October.
ADP said private sector employment climbed by 113,000 jobs in October after rising by 89,000 jobs in September. Economists had expected employment to jump by 150,000 jobs.
“In all, October’s numbers paint a well-rounded jobs picture,” said ADP chief economist Nela Richardson. “And while the labor market has slowed, it’s still enough to support strong consumer spending.”
The Institute for Supply Management is scheduled to release its report on manufacturing activity in the month of October at 10 am ET.
The ISM’s manufacturing PMI is expected to come in at 49.0 in October, unchanged from September. A reading below 50 indicates a contraction.
Also at 10 am ET, the Commerce Department is due to release its report on construction spending in the month of September. Construction spending is expected to rise by 0.4 percent.
The Labor Department is also scheduled to release its report on job openings in the month of September at 10 am ET. Job openings are expected to decrease to 9.2 million in September from 9.6 million in August.
At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended October 27th.
Crude oil inventories are expected to increase by 1.6 million barrels after climbing by 1.4 million barrels in the previous week.
The Federal reserve is scheduled to announce its latest monetary policy decision at 2 pm ET, followed by Fed Chair Jerome Powel’s post-meeting press conference at 2:30 pm ET.
Stocks In Focus
Shares of WeWork (WE) are plummeting in pre-market trading after a report from the Wall Street Journal said the shared workspace company is planning to file for bankruptcy as early as next week.
Online dating services operator Match Group (MTCH) may also come under pressure after reporting a narrower than expected third quarter loss but weaker than expected revenues.
On the other hand, shares of Caesars Entertainment (CZR) are likely to see initial strength after the casino operator reported third quarter results that beat expectations on both the top and bottom lines.
Traders May Cash In On Recent Gains As Fed Announcement Looms
2023-11-01 12:50:44
Mixed Jobs Data May Lead To Choppy Trading On Wall Street