LDN - Business

Futures dip ahead of Fed policy decision, more earnings on tap

[November 01, 2023] By Amruta Khandekar and Shashwat Chauhan

(Reuters) -U.S. stock index futures fell on Wednesday as investors awaited the Federal Reserve's monetary policy decision and kept tabs on corporate updates with the earnings season in full swing.

The Fed is widely expected to keep interest rates unchanged, but investors will focus on Chair Jerome Powell's conference at 1430 ET (1830 GMT) after the statement to gauge how long the central bank could keep rates elevated.

Bets of a 25-basis point rate hike in December currently stand at 27.4%, as per CME Group's FedWatch tool.

"Although the economy has continued to show strength in terms of growth, rising long-term interest rates are doing some tightening work for the Fed," said Daniel Bergvall, head of economic forecasting at SEB Research.

"We believe that it is too early for the Fed to completely close the door to more interest rate hikes, given the strong data, but that the focus will now be even more on how long the policy rate will remain at its current level."

Weighing on the sentiment, the yield on the 10-year note rose to 4.905% while that on the two-year note, which best reflects short-term rate expectations, was largely steady at 5.069%.

The Fed's stance on interest rates will likely set the tone for U.S. equities following a sharp fall in October due to a surge in Treasury yields, the Middle East conflict and mixed earnings reports.

Health insurer CVS Health beat estimates for quarterly profit. Its shares were last down 1.0% in premarket trading.

Estee Lauder fell 13.1% after the beauty products maker cut its annual profit outlook.

Advanced Micro Devices slipped 1.9% after the chipmaker forecast fourth-quarter revenue and gross margins below Wall Street estimates.

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Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 27, 2023. REUTERS/Brendan McDermid

Investors will also parse through a slew of data on the labor market, including the ADP National Employment report and a reading on job openings later on Wednesday, ahead of the monthly payrolls report for October on Friday.

The Institute for Supply Management's (ISM) survey on manufacturing activity last month will also provide more clues on the strength of the economy.

Further, the release of quarterly refunding details from the Treasury Department will be in focus, given a sharp rise in longer-dated bond yields in recent weeks that has fueled concerns about the U.S. fiscal deficit.

Analysts have cautioned that any surprises to the upside could push the 10-year yield higher, likely mounting pressure on stocks.

At 6:51 a.m. ET, Dow e-minis were down 99 points, or 0.3%, S&P 500 e-minis were down 13.75 points, or 0.33%, and Nasdaq 100 e-minis were down 51 points, or 0.35%.

Payroll processor Paycom Software plunged 36.9% after pojecting downbeat fourth-quarter revenue, while First Solar gained 3.9% as the solar panel maker raised the lower end of its full-year profit forecast.

Tinder-owner Match Group fell 7.3% after forecasting fourth-quarter revenue below estimates.

(Reporting by Amruta Khandekar and Shashwat Chauhan in Bengaluru; additional reporting by Bansari Mayur Kamdar; Editing by Sriraj Kalluvila and Dhanya Ann Thoppil)

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