The Fed isn’t easing up on its fight against inflation: Morning Brief

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Thursday, Nov. 3, 2022

Today’s newsletter is by Jared Blikre, a reporter focused on the markets on Yahoo Finance. Follow him on Twitter @SPYJared. Read this and more market news on the go with Yahoo Finance App.

The Federal Reserve raised interest rates once again on Wednesday, and market watchers wasted no time trying to predict the central bank’s future actions and adjust their market positions accordingly.

Stocks rallied after the Federal Reserve announced a rate hike of 75 basis points but hinted that it would raise rates at a slower pace from now on.

Then quites sold off after Fed Chair Jerome Powell emphasized that it’s “premature” to discuss a pause in rate increases. Bears won the day, with the Dow down just over 500 points and the Nasdaq Composite off 3.4%.

WASHINGTON, DC - NOVEMBER 02: US Federal Reserve Bank Board Chairman Jerome Powell answers reporters'  questions during a news conference following a meeting of the Federal Open Market Committee (FMOC) at the bank headquarters on November 02, 2022 in Washington, DC.  In a move to fight inflation, Powell announced that the Federal Reserve is raising interest rates by three-quarters of a percentage point, the sixth interest rate increase this year and the fourth time in a row at rates this high.  (Photo by Chip Somodevilla/Getty Images)

US Federal Reserve Bank Board Chairman Jerome Powell answers reporters’ questions during a news conference following a meeting of the Federal Open Market Committee (FMOC) at the bank headquarters on November 02, 2022 in Washington, DC. (Photo by Chip Somodevilla/Getty Images)

The Federal Open Market Committee on Wednesday raised short-term rates by three-quarters of a percentage point for the fourth consecutive meeting β€” but also delivered language that gave hope to those who want the hikes to ease.

β€œIn determining the pace of future increases in the target range the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation and economic and financial developments,” the policy statement said.

While the statement might have sparked a brief stock rally, it’s also vague. In the face of soaring inflation, the question that consumers and investors alike want answered is: How much higher will the Fed raise rates in order to bring down soaring prices? As always, the Fed has no concrete answer for us.

Still, Fed officials have hinted at how much longer they’ll continue tightening monetary policy.

Powell warned that the Fed’s terminal short-term interest rate will be higher than previously expected. Since Fed officials suggested as much at the last Fed meeting in September, markets already priced in the higher terminal rate. We won’t get more projections until the next meeting in December.

With the latest meeting in the history books, it’s now all about expectations.

Coming into Wednesday, market-based expectations for the December meeting were split between those anticipating a fifth 75 basis point rate hike and those expecting the Fed to “step down” and raise only half a percentage point. Those indications shifted slightly toward the latter camp but are still roughly split.

Today, we still don’t know much more than we did 24 hours ago except that Powell & Co. have yet to flinch as they continue on their path of rate hikes. We’ll have a lot more data at the next Fed meeting in December β€” two inflation reports, two big employment reports, and the results of the US mid-term elections.

We’re all dependent on data like this, and we’ll have to white-knuckle it through another six weeks along with the Fed itself.

What to Watch Today

Economy

  • 7:30 a.m. ET: Challenger Job Cutsyear-over-year, October (67.6% during prior month)

  • 8:30 a.m. ET: Trade BalanceSeptember (-$72.3 billion expected, -$67.4 billion during prior month)

  • 8:30 a.m. ET: Nonfarm Productivitypreliminary Q3 (0.5% expected, -4.1% during prior quarter)

  • 8:30 a.m. ET: Unit Labor CostsQ3 preliminary (4.0% expected, -10.2% during prior quarter)

  • 8:30 a.m. ET: Initial Jobless Claimsweek ended Oct. 29 (220,000 expected, 217,000 during prior week)

  • 8:30 a.m. ET: Continuing Claimsweek ended Oct. 22 (1,450 million expected, 1,438 million during prior week)

  • 9:45 a.m. ET: S&P Global US Services PMIOctober final (46.6 expected, 46.6 during prior month)

  • 9:45 a.m. ET: S&P Global US Composite PMIOctober final (47.3 expected, 47.3 during prior month)

  • 10:00 a.m. ET: factory ordersSeptember (0.3% expected, 0.0% during previous month)

  • 10:00 a.m. ET: Factory Orders Excluding TransportationSeptember (0.2% during previous month)

  • 10:00 a.m. ET: Durable Goods OrdersSeptember final (0.4% expected, 0.4% during prior month)

  • 10:00 a.m. ET: Durables Excluding TransportationSeptember final (-0.5% during previous month)

  • 10:00 a.m. ET: Non-defense Capital Goods Orders Excluding aircraftSeptember final (-0.7% during previous month)

  • 10:00 a.m. ET: Non-defense Capital Goods Shipments Excluding AircraftSeptember final (-0.5% during previous month)

  • 10:00 a.m. ET: ISM Services IndexOctober (55.4 expected, 56.7 during previous month)

earnings

  • Toyota Engine (MT), ConocoPhillips (COP), PayPal (PYPL), Amgen (AMGN), starbucks (SBUX), Cigna (IC), Regeneron Pharmaceuticals (REGN), modern (MRNA), Intercontinental Exchange (ICE), Marriott International (SEA), Monster Beverage (MNST), block (QS), Kellogg’s (k), coinbase (COIN), live nation (LYV), DoorDash (DASH), Hyatt Hotels (H)

Yahoo Finance Highlights

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