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Looming Fed Minutes, Holiday May Lead To Choppy Trading On Wall Street
US Market
The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction following the rally seen in the previous session.
Traders may be reluctant to make significant moves ahead of the release of the minutes of the Federal Reserve’s latest monetary policy meeting later in the day.
The Fed’s early November meeting was conducted before the recent release of tamer-than-expected inflation data, but traders are still likely to look to the minutes for confirmation the central bank plans to slow the pace of interest rate hikes as soon as next month.
The Thanksgiving Day holiday on Thursday may also contribute to choppy trading, as some traders are likely to be away from their desks for travel.
Meanwhile, trading may be impacted by reaction to a slew of U.S. economic data, including recently released reports on initial jobless claims and durable goods orders.
After ending Monday’s trading mostly lower, stocks showed a strong move back to the upside during trading on Tuesday. With the upward move, the S&P 500 closed above 4,000 for the first time since September, while the Dow reached a three-month closing high.
The major averages saw further upside going into the close, ending the day just off their highs of the session. The Dow jumped 397.82 points or 1.2 percent to 34,098.10, the Nasdaq surged 149.90 points or 1.4 percent to 11,174.41 and the S&P 500 shot up 53.64 points or 1.4 percent to 4,003.58.
The strength on Wall Street partly reflected a positive reaction to earnings news from consumer electronics retailer Best Buy (BBY).
Shares of Best Buy soared by 12.8 percent after the company reported better than expected third quarter results and raised its full-year guidance.
Apparel retailer Abercrombie & Fitch (ANF) also spiked after reporting an unexpected third quarter profit on sales that beat analyst estimates.
Abercrombie & Fitch CEO Fran Horowitz also said the company is “cautiously optimistic” about the holiday shopping season.
On the other hand, shares of Zoom (ZM) came under pressure after the video conferencing platform reported better than expected third quarter results but provided disappointing guidance.
Stocks also benefitted from ongoing optimism about the Federal Reserve slowing the pace of interest rate hikes, which persisted despite hawkish comments from some Fed officials.
The Fed’s next monetary policy meeting is scheduled for December 13-14, with CME Group’s FedWatch Tool currently indicating a 75.8 percent chance of a 50 basis point rate hike and a 24.2 percent chance of another 75 basis point rate hike.
Overall trading activity was somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.
Gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 4.6 percent to its best closing level in well over four months.
The rally by gold stocks came even as the price of the precious metal ended the day roughly flat.
Substantial strength was also visible among energy stocks, which benefitted from a notable increase by the price of crude oil.
Reflecting the strength in the sector, the NYSE Arca Oil Index and the Philadelphia Oil Service Index both surged by 3.3 percent.
Natural gas, semiconductor, chemical and housing stocks also saw significant strength on the day, moving higher along with most of the other major sectors.
U.S. Economic Reports
The Labor Department released a report on Thursday showing first-time claims for U.S. unemployment benefits increased by more than expected in the week ended November 19th.
The report said initial jobless claims rose to 240,000, an increase of 17,000 from the previous week’s revised level of 223,000.
Economists had expected jobless claims to inch up to 225,000 from the 222,000 originally reported for the previous week.
With the bigger than expected increase, jobless claims reached their highest level since hitting 245,000 in the week ended August 13th.
A separate report released by the Commerce Department showed new orders for U.S. manufactured durable goods jumped by much more than expected in the month of October.
The report said durable goods orders shot up by 1.0 percent in October after rising by a downwardly revised 0.3 percent in September.
Economists had expected durable goods orders to climb by 0.4 percent, matching the increase that had been reported for the previous month.
Excluding a surge in orders for transportation equipment, durable goods orders rose by 0.5 percent in October after slumping by 0.9 percent in September. Ex-transportation orders were expected to be unchanged.
At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of October. New home sales are expected to plunge by 5.5 percent to an annual rate of 570,000.
The University of Michigan is also due to release its revised reading on consumer sentiment in the month of November at 10 am ET. The consumer sentiment index is expected to be unrevised at 54.7.
At 10:30 am ET, the Energy Information Administration is scheduled to release its report on oil inventories in the week ended November 18th.
Crude oil inventories are expected to inch up by 0.1 million barrels after tumbling by 5.4 million barrels in the previous week.
At 2 pm ET, the Federal Reserve is scheduled to release the minutes of its most recent monetary policy meeting in early November, when the central bank raised interest rates by another 75 basis points.
Stocks in Focus
Shares of Deere (DE) are moving notably higher in pre-market trading after the heavy equipment maker reported better than expected fiscal fourth quarter results and provided upbeat guidance.
Computer and printer market HP Inc. (HPQ) may also move to the upside after reporting fiscal fourth quarter results that beat analyst estimates and announcing plans to cuts up to 6,000 jobs by the end of fiscal 2025.
Meanwhile, shares of Nordstrom (JWN) are seeing significant pre-market weakness after the retailer reported better than expected third quarter results but lowered its full-year profit forecast.
Design software maker Autodesk (ADSK) is also likely to come under pressure after reporting third quarter results that exceeded analyst estimates but providing disappointing guidance for the current quarter.
Europe
European stocks have struggled for direction on Wednesday, as investors await the release of the minutes of the most meetings by the Federal Reserve and the European Central Bank for directional cues.
Business activity fell across the eurozone for the fifth consecutive month in November, adding to fears of a recession.
The eurozone composite PMI rose to 47.8 in November from 47.3 in October, putting the eurozone economy on course for its steepest quarterly contraction since late-2012, according to a preliminary reading released by S&P Global.
While the German DAX Index is down by 0.2 percent, the French CAC 40 Index is nearly unchanged and the U.K.’s FTSE 100 Index is up by 0.2 percent.
Glencore has jumped after it entered into a binding amendment agreement with Metals Acquisition Corp. for the sale and purchase of Glencore’s Cobar copper mine in New South Wales, Australia.
Britvic, a producer of soft drinks, has also shown a strong move to the upside after reporting an increase in full-year profit and revenue.
On the other hand, chemicals maker Johnson Matthey has moved sharply lower after reporting a slightly lower half-yearly profit.
Credit Suisse Group AG has also plunged. The embattled Swiss lender said it would book a loss of up to 1.5 billion Swiss francs ($1.6bn) for the fourth quarter.
Prosus N.V., a Dutch technology investment group, has moved also to the downside after reporting an 82 percent drop in earnings per share for the half year ended September 30.
Asia
Asian stocks ended mostly higher on Wednesday despite lingering worries about the Chinese economy and ahead the release of latest Fed meeting minutes later in the day.
Regional gains were capped by rising COVID-19 infections in China and a record interest rate hike by New Zealand. Trading volumes were somewhat thin amid a holiday in Japan.
China’s Shanghai Composite Index rose 0.3 percent to 3,096.91 even as COVID cases in the country surged toward record highs. China is locking down parts of Beijing and other cities as infections looked set to pass April’s peak.
In its Economic Outlook released Tuesday, the Organization for Economic Co-operation and Development (OECD) warned of a significant growth slowdown for the world economy in 2023. However, the OECD is not predicting a recession, thanks to Asia’s biggest economies China and India.
Hong Kong’s Hang Seng Index gained 0.6 percent to settle at 17,523.81 after five sessions of losses. BYD shares fell over 2 percent after Warren Buffet’s Berkshire Hathaway further trimmed its stake in the electric vehicle maker.
Seoul stocks advanced ahead of the release of the November FOMC meeting minutes. The Kospi closed 0.5 percent higher at 2,418.01. Internet firm Kakao surged 2.6 percent on news that Saudi Arabia might invest in the group’s entertainment unit.
Australian markets rose notably to hit a five-month high as a spike in commodity prices helped lift heavyweight mining, energy and gold stocks. Tech stocks underperformed, with WiseTech Global losing 6.7 percent.
Qantas Airways soared 5.3 percent after the nation’s flag carrier boosted its pre-tax profit guidance for the first half of fiscal 2023 amid the ongoing recovery in travel markets.
The benchmark S&P/ASX 200 Index climbed 0.7 percent to 7,231.80, while the broader All Ordinaries Index ended 0.6 percent higher at 7,422.40.
Commodities
Crude oil futures are plunging $2.43 to $78.52 a barrel after climbing $0.91 to $80.95 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,736.80, down $3.10 compared to the previous session’s close of $1,739.90. On Tuesday, gold inched up $0.30.
On the currency front, the U.S. dollar is trading at 141.13 yen compared to the 141.23 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0321 compared to yesterday’s $1.0304.
