The general feeling around Wall Street this morning is that the U.S. Federal Reserve, and investors alike, are both waiting on domestic earnings reports before taking any meaningful action. That means expectations for a rate hike are largely unchanged.
Those conditions saw the Dow Jones industrial average and the S&P 500 index gain slightly in the morning session in New York.
According to the minutes of the Fed’s latest meeting in September, several voices on the board feel a hike will be “around the corner” if the domestic economy continued its upswing.
“There are downside risks to keeping rates low but the Fed obviously think it’s a greater risk to bump rates at a time when the economic strengthening is in the balance,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in an email to clients yesterday.
According to the CME FedWatch tool, traders are pricing in low odds of a rate hike in November as the U.S. presidential election is just days away from the next Fed meeting. Most traders feel a December hike will be the most likely outcome even if the odds were down slightly from the previous day.
“Investors are going to wait on earnings data in the absence of any solid news from the Fed. And the Fed is likely waiting on the same reports,” Poulsen added.
Thomson Reuters data is forecasting a Q3 fall of around 0.6 percent in the S&P 500 meaning a fourth successive quarter of negative earnings for the benchmark index.
The Nasdaq Composite fell 7.78 points, or 0.14 percent, to 5,239.06, the Dow Jones industrial average rose 15.56 points or 0.08 percent to 18,144.3 and the S&P 500 gained 2.46 points, or 0.12 percent, to 2,139.17.
Cisco Systems weighed heavily on the Nasdaq after stocks dropped amid reports of a massive profit decline for rivals Ericsson.
A more hawkish Fed was feared by investors in both the electronics and real estate sectors. All eyes will be on the next meeting in a month’s time, but odds are rates will be left unchanged yet again.
