The three major indices of the U.S. New York stock market showed early gains on the 1st (local time), just hours before the Federal Reserve's Federal Open Market Committee (FOMC) regular meeting results were announced.
At around 10:15 a.m. at the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average was trading at 33,158, up 0.32% from the previous session. The large-cap S&P 500 index rose 0.43% to 4,212, while the tech-heavy Nasdaq index was up 0.44% at 12,907.
Currently, within the S&P 500, energy, technology, telecommunications, and utilities stocks are rising, while materials, real estate, and healthcare stocks are declining. WeWork plunged 51% compared to the previous session following reports that it may file for bankruptcy as early as next week. CVS Health fell more than 2% after lowering its annual net income guidance despite better-than-expected earnings. On the other hand, semiconductor stock AMD rose over 4% by presenting a positive outlook for its GPU data center segment despite a weaker-than-expected Q4 revenue guidance. Ford and General Motors (GM) showed mixed price movements as Barclays upgraded their investment ratings with increased weightings.
Investors are watching the movement of Treasury yields and economic data releases while awaiting the FOMC regular meeting results and Fed Chair Jerome Powell’s press conference, which will be released at 2 p.m. Eastern Time.
With a rate hold widely expected at this meeting, investors are particularly focused on the monetary policy statement and Powell’s press conference immediately afterward. They are looking to gain additional hints about the direction of monetary policy after December. Previously, the Fed indicated at the September FOMC that a further rate hike could follow within the year, but analyses suggest that the need for Fed tightening has diminished due to easing core inflation and the recent sharp rise in Treasury yields. If Powell signals a dovish stance that rate hikes are nearing an end, the market is expected to react sharply.
According to the CME FedWatch tool, the federal funds futures market currently reflects nearly a 99% probability that the Fed will hold rates steady at 5.25?5.5% at this meeting. The probability of a hold in December is also confirmed at over 74%. The chance of a "baby step" hike in December stands at around 24%. Despite expectations of prolonged high rates, the possibility of a rate hike within the year is viewed relatively low.
The employment data released this morning showed mixed trends. The private employment increase announced by ADP fell short of expectations. Private employment in October rose by 113,000 compared to the previous month, below the Dow Jones consensus forecast of 130,000. The October wage growth rate also recorded its lowest increase since October 2021 at 5.7%. On the other hand, the U.S. Department of Labor’s JOLTS (Job Openings and Labor Turnover Survey) showed a slight increase in job openings in September, confirming continued labor market strength. September job openings rose by 56,000 to 9.55 million, slightly exceeding the FactSet forecast of 9.5 million.
Accordingly, the key focus is the October employment report from the Department of Labor, to be released on the 3rd. Since the Fed has stated that below-trend low growth and labor market cooling are necessary to reduce inflation, attention is on whether signs of slowdown will be confirmed in the labor report. Wall Street expects nonfarm payrolls to increase by about 170,000 to 180,000, with the unemployment rate forecast at 3.8%.
The ISM manufacturing PMI for October, released the same day, came in at 46.7, below expectations. This is lower than both the previous month’s 49 and the Dow Jones consensus forecast of 49.2. A PMI below the baseline of 50 indicates contraction in business conditions.
In the New York bond market, U.S. Treasury yields widened their decline after the Treasury Department released its maturity-specific borrowing plan this morning. The global benchmark 10-year U.S. Treasury yield fell to around 4.78%. The 30-year yield dropped to about 4.94%, and the policy-sensitive 2-year yield fell to around 5.0%. The Treasury announced plans to sell $112 billion next week, which CNBC reported aligns with Wall Street expectations.
The dollar index, which measures the value of the U.S. dollar against six major currencies, is trading around 106.7. During the session, it briefly surpassed 106.9, marking its highest level since October 6. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street’s "fear gauge," fell nearly 4% to around 17.
European stock markets are rising. Germany’s DAX index gained 0.79%, the UK’s FTSE index rose 0.63%, and France’s CAC index increased 0.84%.
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