Wednesday November 2nd


Stock futures tick lower ahead of key Fed policy decision

U.S. stock markets index futures slipped on Wednesday as investors braced for the Federal Reserve’s latest rate decision at the conclusion of its policy meeting. Futures tied to the Dow Jones Industrial Average fell 76 points, or 0.23%. S&P 500 futures and Nasdaq 100 futures traded flat. Stock futures moved toward session lows following the release of better-than-expected private payrolls data for October. The ADP Employment report for October showed that the private labor market is maintaining its strength even as interest rates rise and the Federal Reserve looks to cool off high inflation. Private sector employment increased by 239,000 in October, the Wednesday report showed. The service sector added the bulk of jobs during the month, with large gains in hiring in leisure and hospitality and transportation, trade and utilities. In addition, annual pay was up 7.7% on the year, but the momentum in wage gains is ebbing, according to the report. People who changed jobs were able to get a 15.2% pay increase in October, down from a 15.7% jump in September. The Fed is widely expected to announce a 0.75 percentage point rate increase, its fourth hike in a row of that size as it battles high inflation. Investors are also looking for a signal that the central bank is prepared to slow the pace of its rate-hiking plan come December. Comments from the Federal Reserve and Fed Chair Jerome Powell will play a key role in deciphering where stocks go in the months ahead and whether markets kick off a fresh bull run. “Continuation of the year-end rally is contingent on the Fed delivering on the pivot narrative,” wrote Barclays’ Emmanuel Cau in a note to clients Wednesday. “Peak hawkishness may fuel more FOMO, but should not be confused with dovishness, as CBs continue to walk a fine line. Rate cuts have been a precondition for equities to start a new bull market in the past - we’re not there yet.” The central bank’s decision will come after the release of mixed economic data on Tuesday. The ISM manufacturing index showed the share of companies reporting expansion in October come in slightly ahead of expectation, while the JOLTS report conveyed a strong labor market despite the Fed’s aggressive tightening clip. “That’s just not a great number for the Fed, it’s still a tight job market,” Victoria Greene, chief investment officer at G Squared Private Wealth told CNBC’s “Closing Bell: Overtime” on Thursday. “So I think they’re still between a rock and a hard place. They’re going to have to hike. Nobody likes it. Everybody wants them to stop, but it’s like a car crash in slow motion. They just can’t stop hiking.” In other economic news, mortgage application data for last week came in flat despite a slight tick lower in rates. Earnings season continued with strong results from CVS Health. Advanced Micro Devices rose despite a top and bottom line miss. Shares in the Asia-Pacific were mostly higher on Wednesday as investors brace for another likely 75-basis-point rate hike by the Federal Reserve. Hong Kong’s Hang Seng index was halted after gaining 2.41% to 15,827.17 in earlier trade, following the issuance of a Tropical Cyclone Warning Signal Number 8. This marked the second day of sharp gains for the index, which Goldman Sachs Strategist Timothy Moe attributed to a combination of two factors. The Shanghai Composite in mainland China also reversed losses to gain 1.15% to 3,003.37 and the Shenzhen Component added 1.335% to 10,877.51. In Japan, the Nikkei 225 and the Topix were about flat at 27,663.39 and 1,940.46, respectively. The Kospi was fractionally higher at 2,336.87. South Korea’s inflation inched higher to 5.7% in October, higher than 5.6% forecasted by analysts in a Reuters poll. Oil prices were flat Thursday ahead of an expected rate hike by the Federal Reserve, as market participants eyed falling U.S. crude stockpiles and upcoming European sanctions on Russian barrels. Brent crude rose just 8 cents, or 0.1%, to $94.73 a barrel, while U.S. West Texas Intermediate (WTI) crude was up 6 cents, or 0.1%, at $88.43 per barrel. U.S. crude oil stocks fell about 6.5 million barrels for the week ended Oct. 28, according to market sources citing American Petroleum Institute figures. At the same time, gasoline inventories fell 2.6 million barrels, more than expected. Official data is due at 1430 GMT. Gold prices rose on Wednesday as the dollar weakened, but they held to a tight range with investors reluctant to place big bets before the U.S. Federal Reserve’s rate decision later in the day. Spot gold rose 0.5% to $1,655.06 per ounce, while U.S. gold futures gained 0.5% to $1,658.50.