Wall Street Awaits Key Fed FOMC Decision

It’s the last day of October 2022 — Happy Halloween! — and pre-market futures are giving back recent gains like doling out bite-sized pieces of candy this morning. The Dow is currently on its longest bull run since November 2020, even with the index -177 points at this hour. The Dow is also poised to deliver its best trading month since November 1976!

For their parts, the S&P 500 is -23 points currently and the Nasdaq is -90. We’ve definitely seen a preference for blue chips over tech growth in this latest market advancement, which has come off late September/mid-October lows, depending on the index. The small-cap Russell 2000 is also down ahead of this morning’s bell, but is +11% so far this month — its best monthly performance in two years.

We will have a very busy week ahead of us, as well: even though many of the marquee names of Q3 earnings season have already reported, more than 1600 stocks will be posting results before Friday is out. We’ll also get new jobs reports this week — both the private sector payrolls from Automatic Data Processing (ADP) on Wednesday and the nonfarm payrolls from the U.S. Bureau of Labor Statistics (BLS), along with a new Unemployment Rate, on Friday.

Bigger than any of these things this week will be the latest meeting of the Federal Open Market Committee (FOMC), starting tomorrow and concluding Wednesday, from which another 75 basis-point (bps) interest rate hike is unanimously expected. This would bring the Fed funds rate to 3.75-4.00% for the first time in 15 years — prior to the Great Recession of the late Oughts. It is also increasingly expected that this will be the last of the 75 bps hikes of this cycle, with 50 bps expected in the FOMC’s December meeting.

However the Fed decides to push interest rates in the next couple months will be largely reliant on earnings and also economic data, and this week we look for new prints on PMI and ISM Manufacturing and Services, JOLTS surveys, Construction Spending, Jobless Claims and Q3 Productivity and Labor Costs. None of these reports in and of themselves will likely be able to change the trajectory of the Fed’s interest rate policy. But all of them together, moving in the same direction to a particular degree? For sure they could.

Ahead of today’s open, transportation major XPO Logistics (XPO) posted a bottom-line beat of a solid dime to earnings of $1.45 per share, on revenues which came in a smidge below the Zacks consensus to $3.04 billion in the quarter. This is the 10th straight positive earnings surprise for the Greenwich, CT-based company, with Operating Margins +65% year over year. Pre-market shares are up modestly; the stock is still down more than -30% year to date.

ON Semiconductor (ON) brought a positive earnings report from the beleaguered industry this morning, as well, with earnings of $1.45 per share beating the $1.31 expected on $2.19 billion in quarterly sales, which outpaced the $2.12 billion our analysts were expecting. The company posted record highs in non-GAAP Operating Margins and record high Q3 revenues, +26% year to date. Shares are selling -2% on the news; the company is only -3.5% year to date.

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