The Nasdaq and S&P 500 pared some losses while the Dow reversed course and ticked higher on Wednesday ahead of the Federal Reserve’s policy decision. Stocks had earlier fallen as more economic data showed continued strength in the labor market and added to worries about whether the central bank would be able to temper its pace of rate hikes.
Seven of the 11 S&P sectors were trading in the red, with Consumer Discretionary the top loser. Utilities was the top gainer.
ADP’s measure of private payrolls in Oct. came in at +239K, stronger than the consensus +200K figure. The report comes a day after job openings also unexpectedly rose in September. Both sets of data pointed to continued resilience in the U.S. labor market despite the Fed’s efforts to cool the economy.
“Yesterday’s US job openings data reminded investors of the perils of real time information,” UBS chief economist Paul Donovan wrote. “There was a bounce-back in the numbers – large swings and big revisions are increasingly common. And the data does not do what it says. JOLTs data does not report job openings, it reports a fraction of job openings (and that fraction may not be stable).”
The Fed’s policy meeting will be the most closely watched event of the day. Fed funds futures have priced in an 88% chance of a 75 basis point raise, but investors will be more focused on Fed chief Jerome Powell’s remarks after for clues on future rate hikes.
“But the more important question for markets today (and where there’s considerably more doubt) is whether the Fed might signal a downshift in the pace of hikes at subsequent meetings,” Deutsche Bank’s Jim Reid wrote. “This is a tricky balancing act for them, since any signal of a pivot risks leading to easier financial conditions that makes their job of bringing down inflation even harder.”
“That was what happened after the July meeting, where investors interpreted matters in a dovish light, and the Fed had to reiterate their hawkish intent, culminating in Chair Powell’s August speech at Jackson Hole,” Reid said. Powell will likely “leave open the prospects of another 75bp hike in December, but present a strong base case for downshifting the pace of hikes by early 2023 at the latest.”
In earnings news, Advanced Micro Devices gained on strong quarterly guidance. Vacation rental platform Airbnb slumped on an uncertain demand forecast. Paramount Global was the top S&P 500 loser after disappointing results.
Among other active stocks, Benefitfocus was the top gainer on the Nasdaq after agreeing to be acquired by Voya Financial.
Read More: S&P, Nasdaq pare some losses, Dow reverses course and ticks higher ahead of Fed