Before The Bell
The futures market fell slightly after strong market action throughout yesterday’s session. Earnings results were solid on Tuesday, and many companies provided improved outlooks. Additionally, some news has come out that supply chains are now looking healthier, which ought to help operations at many businesses improve in the coming quarters. Traders bid up the indices to all-time highs, with the Dow Jones Industrial Average surpassing the 36,000 level. Overall, the S&P 500 finished up 17 points, the NASDAQ rose 54 points, and the Dow increased 139 points yesterday. The futures market continued to trade just below breakeven levels throughout the night, not moving too far from its initial lower level overnight. The Automatic Data Processing (ADP) Payroll report, at 8:15 A.M. (EDT), showed that 571,000 jobs were added in October, marking the best month for jobs since June. This outcome included a large increase in hospitality jobs. Still, the futures did not move much with this report, suggesting an uneven start to the trading day.
All eyes will be on U.S. Federal Reserve’s monetary policy decision and Chairman Jerome Powell’s press conference later this afternoon. The Fed had previously signaled that it would soon start to curtail its asset-purchase program, which currently buys around $120 billion worth of mortgage-backed securities and Treasury bonds monthly. Additionally, traders will look to see if they can glean any information about future interest-rate hikes. The market is currently pricing in the first rate hike in 2022. New information could move treasury bonds and the stock market as risky assets are repriced.
Despite the move for the major averages to all-time highs yesterday, market breadth was weak, as decliners outpaced advancers by a 1.2-to-1.0 ratio. Materials stocks were among the best performers, aided by good earnings results and outlooks from a few key companies in the space. However, energy issues were among the laggards, hurt by a drop in related commodities.
In commodity news, oil prices fell yesterday, as traders looked ahead to an OPEC meeting on Thursday. The cartel will decide on production levels tomorrow, and many in the market believe that the countries will broker a deal to increase production. Meantime, the CBOE Volatility Index (or VIX) fell, as demand for options protection waned a bit.
Looking ahead, several economic reports will likely impact the market over the next few days. These releases include initial jobless claims on Thursday and the October jobs report on Friday. Additionally, earnings season will continue, with many companies releasing results over the next couple of days. Overall, we think that any changes from the Federal Reserve and the outlook for the economy (particularly the labor market) will likely drive trading in the days ahead.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
