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 quities 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%.

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

“In 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 — two inflation reports, two big employment reports, and the results of the U.S. 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 Cuts, year-over-year, October (67.6% during prior month)

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

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

• 8:30 a.m. ET: Unit Labor Costs, Q3 preliminary (4.0% expected, -10.2% during prior quarter)

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

• 8:30 a.m. ET: Continuing Claims, week ended Oct. 22 (1.450 million expected, 1.438 million during prior week)

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

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

• 10:00 a.m. ET: Factory Orders, September (0.3% expected, 0.0% during prior month)

• 10:00 a.m. ET: Factory Orders Excluding Transportation, September (0.2% during prior month)

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

• 10:00 a.m. ET: Durables Excluding Transportation, September final (-0.5% during prior month)

• 10:00 a.m. ET: Non-defense Capital Goods Orders Excluding aircraft, September final (-0.7% during prior month)

• 10:00 a.m. ET: Non-defense Capital Goods Shipments Excluding Aircraft, September final (-0.5% during prior month)

• 10:00 a.m. ET: ISM Services Index, October (55.4 expected, 56.7 during prior month)

Earnings

• Toyota Motor (TM), ConocoPhillips (COP), PayPal (PYPL), Amgen (AMGN), Starbucks (SBUX), Cigna (CI), Regeneron Pharmaceuticals (REGN), Moderna (MRNA), Intercontinental Exchange (ICE), Marriott International (MAR), Monster Beverage (MNST), Block (SQ), Kellogg (K), Coinbase (COIN), Live Nation (LYV), DoorDash (DASH), Hyatt Hotels (H)

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