Thursday November 3rd

U.S. stock markets index futures fell Thursday after the Federal Reserve delivered another interest rate hike and signaled that no pivot or rate cut is coming anytime soon. Futures tied to the Dow Jones Industrial Average traded 234 points lower, or 0.73%. S&P 500 futures and Nasdaq 100 futures dipped 1% and 1.26%, respectively. Yields spiked as traders digested the latest rate decision, putting pressure on futures. The yield on the 2-year Treasury note hit its highest level since July 2007 while the benchmark 10-year Treasury yield popped 13 basis points to 4.189%. Traders had anticipated the central bank’s 0.75 percentage point rate increase and initially read the Fed’s statement as dovish, sending stocks higher on Wednesday after the decision was delivered. Those gains then reversed when Fed Chair Jerome Powell said it was “premature” to talk about a rate hike pause and that the terminal rate would likely be higher than previously stated. “We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said. The Dow Jones Industrial Average ended Wednesday’s trading session 505 points lower, or 1.6%. The S&P 500 dropped 2.5%, and the Nasdaq Composite was off by 3.4%. Markets will likely continue to seesaw until it is clear inflation has cooled off and that the Fed has stopped marching rates higher, with traders split over where interest rates are headed. Any data that shows the U.S. economy isn’t slowing as the central bank tightens policy will likely weigh on stocks. “In our view, the risk-reward for markets over the next three to six months is unfavorable, and today’s Fed statement supports that view,” wrote Mark Haefele, UBS’ chief investment officer in a note to clients Wednesday. Meanwhile, the Bank of England implemented a 75 basis point hike on Thursday, its largest increase in 33 years, as it battles high inflation. Investor attention Thursday also turned to October nonfarm payrolls, set to be released Friday. A good jobs number and a low unemployment rate, while good for the economy, could signal more work ahead for the Fed. “You get a good jobs number, in other words a good unemployment rate that doesn’t go higher, then the market is in a lot of trouble,” said Guy Adami, director of advisor advocacy at Private Advisor Group, said on CNBC’s “Fast Money.” Corporate earnings season continued, with Qualcomm, Roku and Fortinet all falling sharply in the premarket on disappointing quarterly results and forward guidance. Peloton’s stock tumbled after reporting a wider-than-expected loss, while Moderna sank on a lowered Covid vaccine sales outlook. Weekly jobless claims nudged lower to 217,000 for the week ended Oct. 29. That was also just below the 220,000 estimate. Also, the trade deficit widened more than expected in September, rising to $73.3 billion, against the estimate for $72.3 billion. Shares in the Asia-Pacific dropped on Thursday after the U.S. Federal Reserve Chairman Jerome Powell signaled further hikes ahead after raising rates by 75 basis points as expected and called discussions on pausing the tightening cycle “premature.” Hong Kong’s Hang Seng index fell 3.11% in the final hour of trade, leading losses in the wider Asia-Pacific trading session. Hang Seng Tech fell 3.49%. Mainland China’s Shanghai Composite lost 0.19% to 2,997.81, and the Shenzhen Component was down 0.344% to 10,840.06. In Australia, the S&P/ASX 200 was down 1.84% at 6,857.90. The Kospi was 0.33% lower at 2,329.17 and the Japanese market was closed for a holiday Thursday. Oil slipped on Thursday as a U.S. interest rate hike pushed up the dollar and increased fears of a global recession that would crimp fuel demand, although losses were capped by concerns over tight supply. Brent crude dropped $1.05, or 1.1%, to $95.10 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell $1.27, or 1.4%, to $88.73. Both benchmarks settled up more than $1 on Wednesday, aided by another drop in U.S. oil inventories, even as the Fed boosted interest rates by 75 basis points and Chair Jerome Powell said it was premature to think about pausing rate increases. Gold prices fell to a near two-week low on Thursday, as the dollar and U.S. bond yields climbed after Federal Reserve Chair Jerome Powell indicated the central bank will stick with raising rates to tame inflation. Spot gold fell 1% to $1,618.69 per ounce, while U.S. gold futures slipped 1.9% to $1,619.5. “The sentiment in the gold market is clearly negative. In case of continued aggressive tightening, more sentiment-driven and dollar-driven selling remains the biggest risk for gold. Prices could undershoot,” said Julius Baer analyst Carsten Menke.