Higher For Longer Still?

Key Takeaways

• Stocks End October In The Red
• JOLTs Number Offers A Peek At Employment Situation
• Fed Decision Expected To Leave Rates Unchanged

Stocks eked out gains on Tuesday; however, they ended lower overall for the month. In fact, October marked the third consecutive month of losses for stocks with the S&P 500 dropping 2.2% and Nasdaq Composite falling 2.8%. We’ll see if markets can turn the tide as we enter the holiday season which will kick itself off with today’s Fed announcement.

As I mentioned Monday, it’s a heavy week for earnings and economic data. Overnight, Advanced Micro Devices
AMD
reported earnings that beat expectations, boosted by demand for AI chips. However, the company offered a disappointing outlook. Shares of AMD are down about 1% in premarket. Yum Brands reported mixed results with better-than-expected earnings, but weaker-than-expected revenue hurt by weaker-than-expected same store sales at Pizza Hut. Shares of CVS are unchanged after the pharmacy chain reported earnings and revenues that beat analyst expectations. The company maintained guidance for full year adjusted earnings, but lowered guidance on full year unadjusted earnings.

After the close today, we’ll hear from Qualcomm
QCOM
and I’m very interested in what they have to say in light of AMD’s disappointing outlook, but Intel’s
INTC
more optimistic forecast. While AI chips have owned the narrative much of this year, there seems to be some green shoots in the personal PC space. Although Qualcomm doesn’t compete in the PC market, the divergence in outlooks between AMD and Intel may suggest pockets of demand for specialized chips are shifting.

In the commodities space, oil is up nearly 2% in premarket. Much like stocks, oil struggled in October, falling 11% for the month. That has been good news for consumers as gasoline prices fell with oil. According to AAA, the average price for a gallon of gas is currently $3.46. That compares with a month ago when the average price stood at $3.82.

Gold ended October just below $2000 per ounce, closing Tuesday at $1994.50. On Monday, gold closed at $2005 which was the first time since July it closed above $2000. Unlike pretty much everything else, gold had its best month in October since March, gaining nearly 6%. We also saw the U.S. dollar hit a 33 year high vs. the Japanese yen. Japan warned of a decline in manufacturing, which is something worth keeping an eye on.

Of course, today will be all about interest rates and the Federal Reserve Open Market Committee (FOMC) meeting. According to the CME, there is a 97% chance the Fed will leave rates unchanged. However, markets will be significantly more interested in hearing what Fed Chairman Jerome Powell has to say looking forward. Many analysts expect to hear “higher for longer” with respect to rates and the focus will be on any changes to that language.

Later this morning we’ll get the latest report on job openings when the October JOLTs report is released. According to Bloomberg, the forecast is for 9.27M job openings, down from last month’s 9.61M. That number will serve as the lead in for Friday’s monthly employment report which is expected to show 188K new jobs created and an unemployment rate of 3.8%.

If you were worried there would be little to look forward to between today’s Fed decision and Friday’s jobs report, don’t fret. After the close tomorrow, Apple
AAPL
will report earnings and if there is a company that can move the market, it’s Apple. According to Yahoo Finance, Apple is expected to report revenues of $89.25B and earnings of $1.39 per share. Shares of Apple are up 18% so far this year, but that is down from a peak 38% back in July.

For today, I expect trading to be a bit sideways heading into the Fed announcement. In premarket activity, stocks are quiet and volatility is flat, but that could all change once Powell begins speaking. As always, I would stick with your investing strategy and long term plans.

tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.