Wall Street weak on Fed-Day, the day when the American central bank led by Jerome Powell will make its rate announcement. Before the start of the session, the US macroeconomic front made it known that,
in October, the US economy created 239,000 new private-sector jobs, better than the 195,000 estimated by economists interviewed by Dow Jones and a slight acceleration from the 192,000 new jobs created in the previous month. Wages, one of the most important parameters for monitoring the inflation trend, rose by 7.7% on an annual basis, down by 0.1 percentage point compared to September. This is what emerged from the ADP National Employment Report.
Waiting at this point for the dissemination of the US employment report, which will be issued the day after tomorrow, Friday 4 November. Economists forecast growth of 205,000, compared to the 263,000 payroll increase in September. Information on the health conditions of the American economy also came with the publication of the ISM manufacturing index which, in October, confirmed its expansion phase, settling at 50.2 points, slightly above the expected 50 points. by Dow Jones economists, but slowed by 0.9 percentage points from September. The index showed that the price sub-index fell by 5.1 points to 46.6 points, indicating the easing of inflationary pressures, a factor that could support the hopes of a less aggressive Fed on rates, in the December meeting. On the outcome of today’s meeting, analysts agree in estimating the fourth consecutive rate hike of 75 basis points by the US central bank.
At 14.45 Italian time, the Dow Jones moves back by more than 125 points (-0.39%), the S&P 500 moves back by 0.41%, the Nasdaq falls by 0.30%.
Yesterday the Dow Jones Industrial Average lost 79.75 points, or -0.24%, to 32,653.20 points, while the S&P 500 lost 0.41% to 3,856.10. The Nasdaq Composite fell 0.89% to 10,890.8 points.
This is how François Rimeu, senior strategist of La Française AM, anticipates and comments on the upcoming announcement on rates by the Fed:
“It is highly plausible that the Federal Open Market Committee (FOMC) will raise rates for the fourth consecutive time by 75 basis points (bps) at its November 2 meeting.
1) The FOMC will raise rates by 75 basis points, bringing them to a range of 3.75% -4.00%. 2) President Powell is not expected to give any indication of the extent of the hike in December to keep all options open ahead of the October US inflation report. 3) Decisions on the pace of increases should continue to depend on incoming data and the evolution of the outlook. 4) Powell shouldn’t rule out higher terminal rates to fight inflation “
“However – continues the senior strategist of La Francaise – in light of the recent comments by the Fed and the fact that federal funds rates are moving in restrictive territory, the central bank could consider less aggressive rate hikes in the future, in order to evaluate the cumulative effects of the interventions implemented on economic activity and inflation “. It is recalled that “Powell will discuss the liquidity of government bonds during the press conference, given the potential buyback program supported by Treasury Secretary Janet Yellen”.
“Overall – concludes the strategist – we believe that the Fed will maintain its restrictive policy until inflationary pressures slow down in an evident way. However, we expect President Powell to decide on a more gradual tightening instead of anticipating rate hikes. This meeting could also lead to a modest tightening of the US interest rate curve ”.
A few days ago, an outlook on what Jerome Powell’s Fed will do came from Goldman Sachs economists led by Jan Hatzius: experts predict a peak for US rates of 5%, after having already revised the estimates upwards on what the US central bank will announce today, also expecting a tightening of 75 basis points.
They also further revised upwards, by 25 basis points, also the outlook on the next monetary tightening: now Goldman Sachs expects a tightening of 50 basis points in December, of 25 basis points in February, and of another 25 basis points in March. .
Goldman Sachs justified its new view with the impression that US inflation will still remain too high, compared to the Fed’s 2% target.
With the fourth consecutive close of 75bps, the Fed is preparing to raise rates today from the current range of 3% to 3.25% to the new range of 3.75% to 4%.
Pending the Fed’s announcement, ten-year US government bond rates slowed to 4.046% while two-year rates, more sensitive to monetary policy decisions,
they are little moved, slightly up, at 4.549%.
Among the titles, look at the Amazon disaster on Wall Street, further demonstrating how for the Big Tech USA, with a few exceptions, the golden times are now a distant memory. Amazon exits the $ 1 trillion club: its market cap slips below the $ 1 trillion mark. The threshold was punctured yesterday, with the sell off that led the stock of the e-commerce giant founded by Jeff Bezos to capitulate by 5.9%, falling for the fifth consecutive session and collapsing to the minimum value since April of 2020.
The AMZN stock travels just above parity in today’s session.
Attention also to the American giant AMD which yesterday, after the end of the day on Wall Street, announced that it had concluded the third quarter of the year with profits and guidance below the expectations of the analysts’ consensus.
The stock is up nearly 7%, however, after the semiconductor maker indicated it expects its sever chip division to grow in the coming quarters.
AMD’s revenue rose 29% year-on-year in the fiscal third quarter ended September 24 to $ 5.57 billion, less than the $ 5.62 billion analysts expected. Net income plunged 93% to $ 66 million, primarily due to Advanced Micro Devices’ acquisition of Xilinx for $ 49 billion. Adjusted earnings per share stood at 67 cents, slightly worse than the 68 cents estimated by the consensus.
For the full year, AMD said it expects revenue of $ 23.5 billion, down from the $ 26.3 billion the group said it estimated in August, and worse than the $ 23.88 billion analysts expected. .
AMD has revised down the outlook on adjusted gross margin for the full year from 54% expected in August to 52%.