Scott Olson
Major market averages drift slightly lower on Wednesday morning as the market waits for what the Fed has to say.
Early on and the Dow (NYSEARCA:DIA) has dipped 0.3%, the S&P 500 (SP500) is off by 0.5%, while the tech heavy Nasdaq Composite has declined 0.5%.
Among the 11 S&P sectors all of them trade in negative territory and are led lower by the Energy and Real Estate segments.
The 10-year Treasury yield (US10Y) is down 1 basis point to 4.03% and the 2-year yield (US2Y) is up 1 basis point to 4.54%.
The Fed decision is almost a foregone conclusion as far as the market is concerned, with fed funds futures pricing in an 88% chance of a hike of 75 basis points.
“But the more important question for markets today (and where there’s considerably more doubt) is whether the Fed might signal a downshift in the pace of hikes at subsequent meetings,” Deutsche Bank’s Jim Reid wrote. “This is a tricky balancing act for them, since any signal of a pivot risks leading to easier financial conditions that makes their job of bringing down inflation even harder.”
“That was what happened after the July meeting, where investors interpreted matters in a dovish light, and the Fed had to reiterate their hawkish intent, culminating in Chair Powell’s August speech at Jackson Hole,” Reid said. Powell will likely “leave open the prospects of another 75bp hike in December, but present a strong base case for downshifting the pace of hikes by early 2023 at the latest.”
ADP’s measure of October private payrolls came in stronger than expected. October ADP Jobs Report came in at +239K, above the consensus +200K figure and prior month reading of +208K.
“Yesterday’s US job openings data reminded investors of the perils of real time information,” UBS chief economist Paul Donovan wrote. “There was a bounce-back in the numbers – large swings and big revisions are increasingly common. And the data does not do what it says. JOLTs data does not report job openings, it reports a fraction of job openings (and that fraction may not be stable).”
Among active issues, Chegg is soaring following a strong earnings report.
