Trading in the U.S. index futures suggests a mixed start on Wednesday, although the Fed rate decision and the signals coming out from the central bank will ultimately decide which direction the market would take.
Contingent on different permutations and combinations, JP Morgan analysts expect the S&P 500 Index to rally over 10% or decline by about 6% to 8% in Wednesday’s session, according to a Bloomberg report. A smaller-than-expected 50 basis points hike and a dovish language will lead to the most optimistic outcome, although the analysts see this as the least likely outcome.
On Tuesday, the major averages opened higher amid optimism that the Fed will thaw down but weak manufacturing readings proved to be the undoing of the markets. Stocks pulled back steeply in early trading, moving into negative terrain and then consolidating around these lower levels.
Communications, IT and consumer discretionary stocks were among the worst hit but energy stocks found some buying interest.
| Index | Performance (+/-) | Value | |
|---|---|---|---|
| Nasdaq Composite | -0.89% | 10,890.85 | |
| S&P 500 Index | -0.41% | 3,856.10 | |
| Dow Industrials | -0.24% | 32,653.20 |
Here’s a peek into index futures trading:
| Index | Performance (+/-) | |
|---|---|---|
| Nasdaq 100 Futures | +0.24% | |
| S&P 500 Futures | +0.06% | |
| Dow Futures | -0.4% | |
| R2K Futures | -0.29% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) rose 0.09% to $384.85 and the Invesco QQQ Trust (NASDAQ:QQQ) climbed 0.14% to $275.50, according to Benzinga Pro data.
On the economic front, the Mortgage Bankers Association will release the weekly mortgage applications volume data at 7 a.m. EDT.
At 7:30 a.m. EDT, the Challenger U.S. job cuts report for October is due. This monthly report counts and categorizes announcements of corporate layoffs based on mass layoff data from the state departments of labor. ADP’s private payrolls report for October would follow at 8:15 a.m. EDT. The private sector in the U.S. may have added 195,000 jobs in October, smaller than the 208,000 gains for September.
The Energy Information Administration’s crude oil inventories report for the week ended Oct. 28 will be released at 10:30 a.m. EDT.
The Fed’s monetary policy-setting arm – the Federal Open Market Committee, will announce its rate decision at 2 p.m. EDT. The central bank will also release a post-meeting policy statement to communicate the same. At 2:30 p.m. EDT, Fed Chair Jerome Powell will address a press conference and talk about the central bank’s rationale for the action.
With inflation still running hot, the Fed will announce another 75 basis-point rate increase, bringing the fed funds target rate to 3.75%-4%, Daniel Berkowitz, senior investment officer at Prudent Management Associates, said in a recent note.
“Coming out of this upcoming meeting, we will be carefully watching Fed signaling on the path of future rate increases," he added.
Given general apprehension about the rapid pace of tightening, the market analyst expects the Fed to signal openness to a higher terminal rate with a longer runway to ultimately get there.
“More specifically, we think a terminal rate above 5% by mid-2023 is a very realistic possibility,” he said.
See also: How The 60/40 Portfolio Stacks Up With The S&P 500
Stocks In Focus:
- Advanced Micro Devices, Inc. (NASDAQ:AMD) rallied over 4% in premarket trading despite the third-quarter miss and warning of more softness for the running quarter. The positive reaction could be due to segmental performances which came in better than what the company hinted at in its preannouncement.
- Education technology company Chegg, Inc. (NYSE:CHGG), Yum China Holdings, Inc. (NYSE:YUMC) and Match Group, Inc. (NASDAQ:MTCH) all rallied on strong earnings reports.
- Li Auto, Inc. (NASDAQ:LI), XPeng, Inc. (NYSE:XPEV) and JD.com, Inc. (NASDAQ:JD) led the gains in Chinese stocks.
- CVS Health Corp. (NYSE:CVS), Rockwell Automation, Inc. (NYSE:ROK), Yum! Brands, Inc. (NYSE:YUM), DISH Network Corp. (NASDAQ:DISH), Humana, Inc. (NYSE:HUM) and Paramount Global (NASDAQ:PARA) are among the important companies releasing earnings before the market open.
- eBay, Inc. (NASDAQ:EBAY), Etsy, Inc. (NASDAQ:ETSY), Marathon Oil, Inc. (NYSE:MRO), Qorvo, Inc. (NASDAQ:QRVO), Qualcomm, Inc. (NASDAQ:QCOM) and Fisker, Inc. (NYSE:FSR) are among companies scheduled to report quarterly results after the close.
Commodities, Other Global Equity Markets:
Crude oil futures were marginally lower after rising strongly on Tuesday, with a barrel of WTI-grade crude oil trading around $88.20.
The currency market was pricing in a tamer-than-expected rate hike, as reflected by the weakness of the dollar against most of its major counterparts.
The Asia-Pacific markets showed mixed and lackluster sentiment on Wednesday as traders in the region waited upon the Fed rate decision with anxiety. The Hong Kong and Chinese markets, however, rallied strongly. Chinese stocks were encouraged by reports that the nation might be getting ready to ease the stringent ease of its zero-COVID policy.
Stocks in Europe saw listless trading at the open and were mixed in the late morning session.
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