US stocks rose on Wednesday after logging a third straight losing month as investors digested updates on the bond market and prepared for the Federal Reserve’s latest policy decision.
The S&P 500 (^GSPC) was up 0.6% while the Dow Jones Industrial Average (^DJI) gained 0.4%. Meanwhile the tech-heavy Nasdaq (^IXIC) rose nearly 0.8%.
Front of mind for Wall Street is the Fed’s decision on interest rates at the end of its meeting Wednesday afternoon, when policymakers are widely expected to hold rates steady while keeping the option to raise rates further if needed.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
Investors will scrutinize the choice of words in the statement as well as Chair Jerome Powell’s comments for clues to the Fed’s thinking on the future path of rates. Officials have stressed they will tread carefully to avoid significantly slowing the US economy as they strive to cool inflation.
Treasury yields edged lower, with the 10-year yield (^TNX) trading around 4.8% ahead of the Fed decision. Yields ticked lower after the US Treasury’s quarterly refunding update revealed the Treasury will auction $112 billion in debt next week, roughly in line with Wall Street’s expectations. Stock investors are watching the announcement more closely than usual, given how the August update contributed to the recent run-up in yields.
On the economic data front, the ADP National Employment Report for October showed 113,000 jobs were added to the US economy, below the Street’s estimates for 150,000.
More financial reports rolled in, in a season that so far has failed to boost stocks. AMD’s shares slipped after the chip designer’s results beat estimates on the top and bottom line but fell short on its fourth quarter guidance. Kraft Heinz missed analysts’ estimates for third quarter sales, while CVS’s profit topped estimates amid a strong performance for its pharmacy business.
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Private payroll wage growth hits a 2-year low
The US labor market continues to show signs of a tight jobs market with increasing signs that pandemic-era wage boosts are evaporating.
ADP private payroll data released Wednesday showed pay growth slowed to its lowest level in two years during October. Meanwhile, job switchers are being rewarded increasingly less, too.
Pay growth for job changers in October decreased to 8.4%, the smallest yearly increase since July 2021. This came as broadly, the ADP employment report showed 113,000 private payroll jobs were added in October, lower than Wall Street’s estimates for 150,000.
“No single industry dominated hiring this month, and big post-pandemic pay increases seem to be behind us,” ADP chief economist Nela Richardson said in the release. “In all, October’s numbers paint a well-rounded jobs picture. And while the labor market has slowed, it’s still enough to support strong consumer spending.”
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The “Magnificent Seven” tech giants that have led the 2023 stock market rally saw their fortunes diverge in October as earnings, industry narratives, and investor fatigue worked through this group of leaders.
“At this point you can’t look at them as seven stocks together,” Interactive Brokers chief strategist Steve Sosnick told Yahoo Finance Live on Tuesday.
Last month, Amazon (AMZN) and Microsoft (MSFT) were the only members of the group to post gains greater than 1% with the Seattle-area giants rising 4.7% and 7.1%, respectively. Both companies reported quarterly results that revealed growth in their cloud units above investor forecasts.
Meanwhile, rival Alphabet (GOOG, GOOGL) saw shares drop more than 5% after downbeat results from its cloud business, while Nvidia (NVDA) lost 6% amid reports the Biden administration could limit AI chip exports to China.
Tesla (TSLA) stock fell nearly 20% after its latest results showed weaker-than-expected profits amid an overall concern about the adoption rate of EVs.
Meta Platforms (META) issued softer-than-expected guidance for the fourth quarter, though the stock finished the month basically flat, rising 0.4%. Apple (AAPL) stock logged a similarly lackluster month, falling 0.3% after a more than 8% drop in September; the iPhone maker will report results on Thursday.
Read more here.
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Manufacturing activity falls more than expected
The strong September manufacturing report might have been a blip in the radar.
After rising to a reading of 49 in September, October Manufacturing ISM fell to 46.7, a sign of contraction in the manufacturing industry. Economists surveyed by Bloomberg had expected a reading of 49.
Multiple respondents to the survey quoted in the release referenced signs of a slowdown in their industry.
“Economy absolutely slowing down. Less optimism regarding the first quarter of 2024,” a respondent from the chemical products industry said.
Meanwhile, the new orders index remained in contraction territory at 45.5, lower than the 49.2 recorded in September. The employment index also decreased on Wednesday to 46.8 from a reading of 51.2 the month prior.
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Stocks open higher
Stocks were in the green at the open as investors digested an announcement on bond issuance that met Wall Street’s expectations ahead of a Federal Reserve monetary policy decision expected Wednesday afternoon.
The benchmark S&P 500 (^GSPC) jumped about 0.1% while the Dow Jones Industrial Average (^DJI) rose just above the flat line and the tech-heavy Nasdaq Composite (^IXIC) rose about 0.3%.
Treasury yields ticked lower after the US Treasury’s quarterly refunding update revealed the Treasury will auction $112 billion in debt next week, roughly in line with Wall Street’s expectations.
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Stock futures fall ahead of Fed policy decision
The major US stock indexes fell ahead of the market open on Wednesday as investors braced for the Federal Reserve’s call on interest rates and as earnings reports flooded in.
Futures on the Dow Jones Industrial Average (^DJI) were down 0.33%, or 109 points, while S&P 500 (^GSPC) futures dropped 0.39%. Contracts on the tech-heavy Nasdaq 100 (^NDX) fell 0.44%.
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