Ahead of the Federal Reserve's interest rate decision and a series of U.S. jobs data, U.S. equity futures trade slightly weaker but overall little change (S&P 500 / Nasdaq 100 are flat 0.0% / -0.1%), while U.S. government bonds rose, leading to slightly lower yields.
WeWork plunged 42% in pre-market trading after the Wall Street Journal reported that the company plans to file for bankruptcy as early as next week. European retailers outperformed the broader market, led by Next, which raised its earnings forecast. British pharmaceutical and biotechnology company GSK also reported solid earnings and raised its 2023 forecast. Other major companies (such as Qualcomm, Airbnb and PayPal – all after the NYSE close) will report earnings today.
It's probably the least exciting Fed rate decision in more than two years. I don't expect any surprises and the Fed will remain in a wait-and-see mode. However, I expect Fed Chair Jerome Powell to signal some hawkishness – Powell will try to push back dovish hopes by saying the Fed is ready to raise rates further if needed. However, since the sharp rise in yields has helped tighten financial conditions, I see little (=no) reason for the Fed to tighten further. I expect some relief after the Fed's rate decision, even though Powell will emphasize that rates will remain “higher for longer.“
I expect sideways movement again today, but we may see some selling ahead of the rate decision and then increased volatility (especially during the press conference). Stocks should be able to hold gains for the most part – before investors become (even) more cautious tomorrow ahead of the Apple report.
Japanese markets, including the JPY, remained on the move for a turbulent day as authorities issued verbal warnings on the yen and again intervened in the bond market. Even though the JPY remains very weak – the downside potential of the JPY is increasingly limited and the possibility of intervention is rising.
Elsewhere, oil prices climbed today after heavy losses at the beginning of the week. The still ongoing war between Israel and Hamas continues to be the focus, but I believe concerns about a disruption in oil supply will remain lower for now. Safe haven demand will increase towards the end of the week as investors become more nervous towards the weekend and Apple warns of falling sales / weak Chinese demand. Gold is trading 0.2% higher, having even slipped below $1,980 yesterday after initially trading above $2,000. I expect the $2,000 level to be breached again soon.
We also see a stronger USD as investors expect the Fed to position itself more hawkish than other central banks. I think much of the potential “hawkish” rhetoric is priced in for the short term. However, the USD continues to be in demand. The EUR fell sharply today after investors misinterpret Eurozone data yesterday – Eurozone inflation is at 2.9% y/y and continues to cool rapidly.
👁 ROB'S MARKET OVERVIEW:
November 1, 2023
🇺🇸 US Markets ➡️/↕️ (sideways movement with more volatility near/after Fed rate decision9
Cyclical Stocks ➡️/↕️
Tech/Growth Stocks ➡️/↕️
Financial Stocks ➡️/↕️
Defensive Stocks ➡️
Energy Stocks ↗️/➡️ (recovery gains as oil prices found a bottom)
Materials Stocks ↘️/➡️
JPY ↗️/↘️ (rebound from overselling yesterday; JPY remains weak)
EUR ↘️ (sharp losses after yesterday's mispricing)
USD, CAD ↗️/➡️ (hawkish Fed priced in – further short-term upside limited)
⚒ Commodity Markets ↕️
Oil prices ↗️/➡️ (strong early gains – gains limited near $83.00 – $83.50)
Natural Gas prices ↘️/↕️
Metal prices ↕️
Gold ➡️/↗️ (gold overall remains in demand, recovers as USD upside limited for today)
⚡️Cryptos ➡️/↗️ (in sideways, slight gains as further stocks gains limited)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)