US open: Stocks mixed in cautious trade ahead of the Fed

US futures

Dow futures -0.25% at 32577

S&P futures -0.06% at 3851

Nasdaq futures +0.04% at 11300

In Europe

FTSE -0.4% at 7157

Dax -0.2% at 13301

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ADP payrolls beat forecasts

US futures are in the red, paring earlier gains as investors digest stronger-than-expected ADP payroll data ahead of the FOMC interest rate decision later today.

ADP private payrolls beat forecasts in October, rising 239k, up from 193k and well ahead of estimates of 192k. The data, along with yesterday’s JOLTS job vacancies, shows that the US jobs market looks strong despite rising interest rates and high inflation.

Rather than encourage the Fed to adopt a less hawkish stance, which is what the market has been pricing in across the past few weeks, the data could embolden the Fed to power ahead with its aggressive stance on monetary policy into next year.

Rising core inflation, stronger than forecast Q3 growth, and a solid labor market are not signs for the Fed to slow hikes, and given that the Fed has said that they are data dependent, the market may well have gotten ahead of itself once again.

Should the Fed fail to signal a less hawkish stance going forwards, stocks could fall further.

Corporate news:

CVS Health is rising pre-market after raising its full-year forecasts and beating Q3 expectations. Revenue rose 10% YoY to $81.16 billion, and EPS was $2.09 ahead of the $1.99 forecast. CVS also agreed to pay $5 billion to an opioid settlement.

Airbnb fell 6% after the vacation holiday rental company forecast disappointing holiday quarter revenue. The strong USD is starting to pressure its business, and booking will moderate.

Where next for the Dow Jones?

The Dow Jones ran into resistance at the falling trendline dating back to the start of the year, at just below 33,000. The move lower has pulled the RSI out of overbought territory. Meanwhile, the 20 sma is crossing above the 50 sma in a bullish signal. Buyers will look for a move above 33,000 to extend the bullish run to 33450, the late August high. Meanwhile, sellers could look to target 81815, the June 21 high, ahead of the 20 & 50 sma at 30960.

FX markets – USD falls, GBP rises.

The USD is tracking treasury yields lower ahead of the FOMC rate decision. Investors continue to weigh up the likelihood of the Fed revealing a dovish signal, even as data continues to come through strong.

EURUSD is rising modestly thanks to the weaker USD. Eurozone manufacturing PMI was downwardly revised to 46.4 in October, from 46.6, and down from 48.4. The data shows that manufacturing in the region is in a broad-based downturn as new orders fall, and inflation remains persistently high.

GBPUSD is clinging to gains in cautious trade ahead of the FOMC today and the BoE rate decision tomorrow. The BoE is widely expected to hike rates by 75 basis points. However, the economic outlook remains dire. Manufacturing PMI figures yesterday indicated that the economy was heading into a recession.

GBP/USD +0.12% at 1.1500

EUR/USD +0.17% at 0.9920

Oil steadies ahead of the Fed.

Oil prices are holding steady on Thursday as investors look cautiously ahead toward the Federal Reserve interest rate decision ad to the latest stockpile data. Higher interest rates for longer could slow global growth further and drag on the oil demand outlook. Meanwhile, a less hawkish Fed could be a bullish signal for oil prices.

Oil prices have pared earlier gains driven by API data showing that crude oil stockpiles unexpectedly fell 6.5 million barrels. Gasoline inventories also fell by 2.6 million barrels.

Attention will now turn to EIA inventory data which is also expected to fall.

Separately China’s widening COVID lockdowns are a concern for the demand outlook. However, this is being offset by unconfirmed reports that Beijing is considering ways to exit the zero-COVID strategy.

WTI crude trades +0.4% at $88.15

Brent trades +0.4% at $94.56.

Learn more about trading oil here.

Looking ahead

14:30 EIA crude oil inventory

18:00 Fed interest rate decision

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