October 5, 2022

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Stocks drift higher as traders prepare for Fed decision

Stocks drift higher as traders prepare for Fed decision

US stocks fell on Wednesday, as investors looked ahead to the Federal Reserve’s latest monetary policy decision on the back of rising inflation and the still-tight US labor market.

The S&P 500, Dow and Nasdaq are all accelerating to the downside in intraday trading. Treasury yields are up across the curve, and the benchmark 10-year yield is hovering just under 3%, or near its highest level since late 2018.

Investors await the Federal Reserve’s monetary policy statement and press conference from President Jerome Powell later Wednesday afternoon. The central bank is widely expected to raise interest rates by 50 basis points for the first time since 2000. That increase would be double the 25 basis point increase the Fed launched in mid-March, which itself was the first rate hike since Now 2018. This would make the target range for the fed funds rate between 0.75% and 1.00%, compared to the current range between 0.25% and 0.50%.

Expectations about such an excessive rate hike have been building for weeks among market participants, especially given comments from senior Federal Reserve officials who seem to support such a move. Powell He said during a public appearance with the International Monetary Fund earlier this month He believes it would be “appropriate…to move a little faster” on rate hikes, and that 50 basis points were “on the table” for May. The Fed is also expected to use the May meeting to announce the start of quantitative tightening, or the withdrawal of assets from the central bank’s $9 trillion balance sheet.

The prospect of higher interest rates has stirred up volatility in the stock markets, which for the past two years have been used to ultra-low interest rates and loose monetary policies in general. However, at the same time, many critics have suggested that the Federal Reserve has allowed its supportive pandemic-era policies to run longer than they should, allowing inflation to rise to the fastest rates since the 1980s. And after GDP growth turned negative in the US in the first three months of the year, there remains a lingering question whether the Fed will now be able to tighten policies without pushing the economy into a deep contraction.

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“As the market did a 50 basis point rate hike at the Fed meeting in May, focus will immediately shift to the number of half point hikes the Fed expects to start during the 2022 balance,” Daniel Dimartino Booth, CEO and chief strategist. At Quill Intelligence, he wrote in an email on Tuesday. The Fed will shock the markets if it fails to implement a more aggressive policy with a 50 basis point rate hike on Wednesday.”

“The Fed’s credibility is on the line, given rising inflation, which has proven to be anything but temporary,” Booth added. “Interest rates are too low and markets are too accustomed to almost unlimited liquidity from Fed bond purchases. Powell’s biggest folly may be to insist that the economy is too strong in the face of overwhelming evidence that it is slowing and slowing rapidly.”

11:28 a.m. ET: US service sector expansion slowed slightly in April: ISM

The US service sector saw a slight slowdown in growth in April compared to March, with higher prices and ongoing supply constraints weighing on the expansion.

The Institute for Supply Management’s services index for April fell to 57.1 from 58.3 in March, according to a new report on Wednesday. Consensus economists were looking for a slight increase to 58.5, according to Bloomberg data. Readings above the neutral level of 50.0 indicate expansion in a sector.

Under the benchmark, the ISM price sub-index rose to an all-time high of 84.6, indicating continued inflationary pressures. Meanwhile, the sub-inventory tracking index rose to 46.7, but remained in contraction territory for the second month in a row. The ISM services employment sub-index has fallen into contraction territory as well, falling to 49.5 from 54.0 in March.

“Growth continues in the service sector, which has expanded in all but two of the last 147 months. There was a decline in the composite index, mostly due to the pool of restricted employment (affecting the employment index) and the slowdown in the growth of new orders,” said Anthony Neves, President Institute for Supply Management, in a press release. “Business remains strong; However, high inflation, capacity constraints, and logistical challenges are drawbacks, and the Russo-Ukrainian War continues to affect material costs, most notably fuel and chemicals.”

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9:35AM ET: Stocks changed a bit

Here are the major moves in the markets as of 9:33 AM ET:

8:30 a.m. ET: US private payrolls missed expectations in April, rising by 247,000 vs. 383,000 expected

Salaries soared Less than expected in the US private sector last monthas employers work for Fill in ongoing vacancies to help meet demand.

Private sector salaries grew by 247,000 in April, ADP In its closely watched monthly report on Wednesday. That followed an increase of 479,000 jobs in the private sector in March, according to the revised monthly ADP report. Economists were unanimously looking for a private payroll increase of 383K, according to Bloomberg data.

The US service sector saw the biggest gain in private payrolls last month, with nearly every industry group returning jobs. However, job growth slowed compared to March, which contributed to the main slowdown in total private payroll gains. Leisure and hospitality employers added 77,000 jobs in April, which while still larger than any industry group, was less than half the payroll gains from March. This was followed by professional and business services, where salaries rose by 50,000 in April, and education and health services with gains of 48,000. In the commodity production sector, salaries have grown on the net in both the manufacturing, construction and mining industries.

Additionally, depending on company size, small businesses saw a significant drop in hiring last month. Small businesses, or those with 49 or fewer employees, shed a total of 120,000 jobs last month, while medium and large firms gained 46,321,000, respectively.

7:39 a.m. ET: Uber posts better-than-expected quarterly results, guidance

Uber (Uber) published estimates topping first-quarter results and current-quarter guidance Wednesday morning, with the passenger-booking company noting that it was operating through a driver shortage while maintaining strong profitability.

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Revenue more than doubled during the first quarter to $6.9 billion, topping estimates of $6.1 billion, according to data compiled by Bloomberg. Adjusted EBITDA increased to $168 million, also beating expectations of $135 million. Flights during the first quarter increased by 18% compared to last year to reach 17.1 billion, confirming the continued recovery in passenger demand.

For the current quarter, Uber said it expects total bookings between $28.5 million and $29.5 billion, and adjusted EBITDA between $240 million and $270 million.

Uber shares pared their losses in early trading after the results. Earlier during the evening session, Uber shares fell in sympathy with Lyft, which fell after the public transportation company presented current-quarter revenue and earnings expectations that did not live up to analysts’ expectations.

Uber was previously scheduled to report its quarterly results after the market closed on Wednesday, but after the Lyft report, it “has been rescheduled to provide a timely update on the company’s performance and guidance before the market opens.” According to a statement.

7:29AM ET Wednesday: Stock futures gains

This is where the markets were trading before the opening bell

  • S&P 500 futures contracts (ES = F.): +16.75 points (+0.4%) to 4186.00

  • Dow futures contractsYM = F.): +122 points (+0.37%) to 33155.00

  • Nasdaq futures contractsNQ = F.): +44.75 points (+0.34%) to 13,132.25

  • raw (CL = F.): + $3.88 (+ 3.79%) to $106.29 per barrel

  • He went (GC = F.): – $4.30 (-0.23%) to $1,866.30 per ounce

  • Treasury for 10 years (^ degeneration): +0.4 basis points to produce 2.962%

6:01pm ET Tuesday: Stock futures open mixed

Here’s where the markets are trading on Tuesday night:

  • S&P 500 futures contracts (ES = F.): +1.5 points (+0.04%) to 4170.75

  • Dow futures contractsYM = F.): -2 points (-0.01%) to 33,031.00

  • Nasdaq futures contractsNQ = F.): +22.75 points (+0.17%) to 13110.25

NEW YORK, NY – APRIL 28: Traders work on the floor of the New York Stock Exchange (NYSE) on April 28, 2022 in New York City. The Dow Jones Industrial Average rose in morning trading as markets continued to move through a period of volatility due to inflation concerns and the war in Ukraine. (Photo by Spencer Platt/Getty Images)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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