U.S. stocks rose on Wednesday after posting a third straight month of losses as investors digested news on the bond market and prepared for the Federal Reserve’s latest policy decision.
The S&P 500 (^GSPC) rose 0.6%, while the Dow Jones Industrial Average (^DJI) rose 0.4%. Meanwhile, the tech-heavy Nasdaq (^IXIC) rose nearly 0.8%.
The main focus for Wall Street is the Fed’s decision on interest rates at the end of its meeting on Wednesday afternoon, where policymakers are widely expected to keep rates stable while retaining the option to raise rates if necessary to continue to raise.
Read more: What the Fed’s pause on rate hikes means for bank accounts, CDs, loans and credit cards
Investors will be closely scrutinizing the wording in the statement, as well as comments from Chairman Jerome Powell, for clues about how the Fed thinks about the future path of interest rates. Officials have stressed they will proceed cautiously to avoid a significant slowdown in the U.S. economy as they try to cool inflation.
Treasury yields fell slightly, with the 10-year yield (^TNX) at around 4.8% ahead of the Fed decision. Yields fell after the U.S. Treasury Department’s quarterly refund update showed the Treasury will auction $112 billion in debt next week, roughly in line with Wall Street expectations. Stock investors are watching the announcement more closely than usual as the August update contributed to the recent rise in yields.
In economic data, the ADP National Employment Report for October showed that the U.S. economy added 113,000 jobs, below the Street’s estimate of 150,000.
More financial reports came in in a season that has so far failed to provide a boost for stocks. Shares of AMD fell after the chip developer’s results beat estimates on revenue and profit but fell short of its fourth-quarter forecasts. Kraft Heinz missed analysts’ estimates for third-quarter revenue, while CVS’ profit beat estimates amid strong performance from its pharmacy business.
JPrivate sector wage growth hits a two-year low
The U.S. labor market continues to show signs of tightening labor market conditions and increasing signs that pandemic-era wage gains are easing.
ADP private payroll data released on Wednesday showed wage growth slowed to its lowest level in two years in October. Meanwhile, job changers are also being paid less and less.
Wage growth for job changers fell to 8.4% in October, the smallest annual increase since July 2021. This largely came as the ADP employment report showed that 113,000 private payroll jobs were created in October, which is less than Wall Street estimates of 150,000.
“No single industry dominated hiring this month, and the big post-pandemic wage increases appear to be behind us,” ADP Chief Economist Nela Richardson said in the release. “Overall, the figures for October paint a comprehensive picture of the labor market. And while the labor market has slowed, there is still enough to support strong consumer spending.”
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The “Magnificent Seven” tech giants that led the 2023 stock market rally saw mixed fortunes in October as earnings, industry narratives and investor fatigue weighed on this group of executives.
“At this point, you can’t look at them as seven stocks together,” Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance Live on Tuesday.
Last month, Amazon (AMZN) and Microsoft (MSFT) were the only members of the group to post gains of more than 1%, with the Seattle-area giants rising 4.7% and 7.1%, respectively. Both companies reported quarterly results that showed growth in their cloud units above investor forecasts.
Meanwhile, rival Alphabet (GOOG, GOOGL) saw its shares fall more than 5% after its cloud business posted poor results, while Nvidia (NVDA) fell 6% after reports that the Biden administration would curb AI exports. Chips to China could be restricted.
Shares of Tesla (TSLA) fell nearly 20% after recent results showed weaker-than-expected profits and broader concerns about the adoption rate of electric vehicles.
Meta Platforms (META) gave weaker-than-expected guidance for the fourth quarter, although the stock ended the month essentially flat, up 0.4%. Apple shares (AAPL) had a similarly lackluster month, falling 0.3% after falling more than 8% in September. The iPhone maker will report results on Thursday.
Read more here.
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Manufacturing activity is falling more sharply than expected
September’s strong production report may have been a small spark.
After rising to a reading of 49 in September, the manufacturing ISM fell to 46.7 in October, a sign of a decline in the manufacturing sector. Economists surveyed by Bloomberg had expected a reading of 49.
Several survey respondents quoted in the press release pointed to signs of a slowdown in their industry.
“The economy is slowing down completely. Less optimism about the first quarter of 2024,” said a chemical industry respondent.
Meanwhile, the new orders index remained in declining territory at 45.5, down from 49.2 in September. The employment index also fell to 46.8 on Wednesday from 51.2 in the previous month.
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Stocks open higher
Stocks opened in the green as investors digested a bond offering announcement that was in line with Wall Street’s expectations ahead of a Federal Reserve policy decision expected Wednesday afternoon.
The benchmark S&P 500 (^GSPC) rose about 0.1%, while the Dow Jones Industrial Average (^DJI) rose just above the flat line and the tech-heavy Nasdaq Composite (^IXIC) rose about 0.3%.
Treasury yields fell after the U.S. Treasury Department’s quarterly refund update showed the Treasury will auction $112 billion in debt next week, roughly in line with Wall Street expectations.
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Stock futures fall ahead of Fed policy decision
Major U.S. stock indexes fell before the market open on Wednesday as investors braced for the Federal Reserve’s interest rate hike and flooded in on earnings reports.
Dow Jones Industrial Average futures (^DJI) fell 0.33%, or 109 points, while S&P 500 futures (^GSPC) fell 0.39%. Contracts on the tech-heavy Nasdaq 100 (^NDX) fell 0.44%.
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