US stocks fail to hold gains after Fed’s rate hike

The news shaping the markets today

Authorities in the Kyiv region began shutting down the power generating system after a surge in consumption. The safe-haven US dollar index continued to climb this morning.

The Hong Kong Monetary Authority raised its base rate by 75 basis points to 4.25% at its November meeting. Despite this being the sixth rate increase this year, the HKD/USD forex pair remained under pressure.

Ireland’s services PMI fell to 53.2 in October, from a reading of 54.1 a month ago. However, the country’s services sector remaining in the expansion zone sent the EUR/USD pair higher in forex trading this morning.

China’s general composite PMI fell to 48.3 in October, from 48.5 in the previous month. The country’s composite index declining to the lowest level since May exerting pressure on the CNY/USD forex pair.

Australia’s trade surplus widened to A$12.44 billion in September, versus A$8.66 billion in the earlier month. The latest reading easily exceeded market estimates of A$8.85 billion and sent the AUD/USD pair higher in forex trading this morning.

What’s happening: US stocks settled lower in another volatile session on Wednesday, following the Federal Reserve’s interest rate decision.

What happened: Stocks rose sharply immediately after the US central bank announced an interest rate hike of 75bps.

However, investors moved to the sidelines following comments from Fed Chairman Jerome Powell and ahead of the release of some big economic reports.

Why it matters: The Federal Reserve raised the federal funds rate by 75 basis points to a range of 3.75%-4% at its November meeting, in-line with market expectations. Fed policymakers voted unanimously for the recent hike.

The latest move comes as the sixth straight rate hike and the fourth consecutive increase by three quarter points, which sent borrowing costs to a the highest since 2008.

Markets continued to speculate a slowdown in the Fed’s rate hikes in December. However, during a news conference after the rate announcement, Powell said it was too early to speculate a pause in rate increases.

The recent statement came after the Labor Department reported job adds of 263,000 in September and a decline in the unemployment rate to 3.5%.

Although annual inflation in the US eased for the third straight month to 8.2% in September, but still came in above market estimates of 8.1%. Also, the inflation core rate accelerated to 6.6%, reaching the highest level since August 1982.

Investors also responded to the release of earnings by some big companies. Airbnb’s shares fell around 13% on Wednesday, despite upbeat quarterly results, as management issued a gloomy revenue outlook for the holiday quarter. Shares of ZoomInfo Technologies plummeted around 29%. Although the company managed to beat earnings estimates for the third quarter, it lowered its free cash flow forecast.

Wall Street stocks recorded gains after the Fed’s rate announcement, with the Dow Jones index jumping around 300 points. However, markets turned bearish following comments from the Fed chief.

The Dow Jones index dipped around 505 points, or 1.55%, to close at 32,147.76 on Wednesday, while the S&P 500 fell 2.5% to 3,759.69 and the Nasdaq 100 shed 3.39% to settle at 10,906.34.

What to watch: Investors await the release of economic reports on balance of trade, initial jobless claims and non-manufacturing PMI from the US today. US trade deficit, which shrank to $67.4 billion in August, is expected to widen to $72 billion in September. Analysts project weekly jobless claims to rise to 223,000 for the latest week, compared to 217,000 in the week ending October 20. The ISM Services PMI is expected to decline to 54.5 in October, from 56.7 in September.

Data on October non-farm payrolls and unemployment rate, due on Friday, will also remain in focus.

The markets today

Crude oil will be in focus today after closing higher on Wednesday

Context: Oil prices rose to the highest in three weeks on Wednesday, following a surprise contraction in US oil inventories in the latest week.

Details: China’s strict zero-covid policy has limited gains for oil so far this year, by curbing demand from the world’s second largest oil consumer.

The Energy Information Administration said on Wednesday that US crude oil inventories had declined by 3.115 million barrels in the week ended October 28, compared to market views of an increase of 0.367 million barrels.

Gasoline stockpiles also fell by 1.257 million, compared to estimates of a 1.358 million decline, while distillate stockpiles grew 0.427 million, versus expectations of a 0.56 million decline.

The OPEC+ group seems undeterred from its plan to lower oil production by 2 million bpd (barrels per day) in November. Markets believe the cartel would continue to intervene in the oil markets to support prices.

Brent crude for January delivery added $1.51 to settle at $96.16 per barrel, while WTI crude oil for December delivery rose $1.63 to close at $90.00 per barrel on Wednesday.

In other energy trading, wholesale gasoline for December delivery gained 11 cents to $2.70 a gallon, while December natural gas climbed 56 cents to $6.27 per 1,000 cubic feet.

What to watch: Markets await the EIA’s report on natural gas stockpiles today. US natural gas inventories had grown by 52 billion cubic feet in the week ended October 21. Traders will also keep an eye on the EU embargo on Russian oil, scheduled to commence on December 5.

Other Markets: European trading indices closed lower on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.58%, 0.61%, 0.81% and 0.29%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Russia’s composite PMI and services PMI, Turkey’s inflation rate, producer prices, consumer price index and gross foreign exchange reserves, South Africa’s S&P Global PMI, Brazil’s IPC-Fipe inflation, Spain’s unemployment change, number of foreign tourist arrivals and new car sales, Italy’s unemployment rate, UK’s composite PMI, services PMI and Bank of England’s interest rate decision, Eurozone’s unemployment rate, France’s new car registrations, India’s money supply M3, balance of trade and monetary policy committee meeting, US Challenger job cuts, unit labour costs, non-farm labour productivity, composite PMI, services PMI and factory orders, Canada’s balance of trade and value of building permits, as well as Saudi Arabia’s interest rate decision.