Stock futures opened near the flat line Tuesday evening as investors awaited a key monetary policy decision from the Federal Reserve.
Contracts on the S&P 500 traded sideways. The blue-chip index had set a record closing high for a fourth straight session earlier in the day while the Dow closed above 36,000 for the first time ever, buoyed by an extended run of better-than-expected corporate earnings results.
Some of the closely watched names that reported results after market close continued this winning streak. Lyft (LYFT) shares gained in late trading after the ride-hailing company posted third-quarter revenue and earnings, excluding some items, that exceeded expectations, with a recovery in ridership helping boost results. Food giant Mondelez (MDLZ) also offered third-quarter results and a full-year forecast that exceeded estimates. In other corporate developments, Bed Bath & Beyond (BBBY) announced a new e-commerce partnership with Kroger, and the stock surged in late trading.
Other companies, however, bucked the positive trend of stronger-than-expected earnings and guidance. Activision Blizzard (ATVI) shares sank in late trading after the video game company posted weak current-quarter guidance, and Match Group (MTCH) slid as lingering COVID-related impacts in Asia also dampened its outlook.
Investors on Wednesday will turn their attention to the Federal Reserve's latest monetary policy decision and press conference from Fed Chair Jerome Powell. Many market participants are expecting the Fed to formally announce the start to tapering of its crisis-era asset purchase program, which had been one of the primary tools helping to underpin the economic recovery and financial markets over the course of the pandemic.
Currently, that asset purchase program is taking place with $120 billion worth of agency mortgage-backed securities and Treasurys per month. The Fed has previously signaled it would likely begin tapering these purchases soon and continue the process through the middle of next year.
The bigger question for market participants has now become when the Fed will begin to raise interest rates. The Fed's latest monetary policy decision will not come with updated projections on the interest rate outlook from individual policymakers. However, at the conclusion of the Fed's last meeting, the outlook showed a divided committee for next year, with nine members seeing no rate hikes by the end of next year while the other nine members saw at least one hike.
"The Fed is trying to separate the two and saying, listen, the fact that we start with tapering now doesn't mean that we start hiking interest rates later on," Willem Sels, HSBC Global Private Banking and Wealth chief investment officer, told Yahoo Finance on Tuesday. "The reason, of course, is because there is that uncertainty around the economy, around the labor market, which still has five million more people out of the job market than before the pandemic. And then also, when will inflation come down?"
"So the Fed doesn't want to lock itself into those interest rates hikes yet," he added. "As long as those earnings continue to do well and the Fed signals that it will be slow with those interest rate hikes, I think the market will continue to drift up, albeit with some more volatility than before."
Still, the persistently hotter-than-expected inflationary pressures in the recovering economy have put the Fed in a difficult spot when it comes to waiting on rate hikes, many economists argued. These elevated levels of inflation might push the Fed to raise rates more quickly than previously telegraphed, some maintained.
"The Fed's credibility will be enhanced if Mr. Powell does not have to return to the press conference platform in December, January and March and again have to explain why inflation has risen even further," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note. "The danger has increased that the Fed will be forced into faster tapering an an insurance hike next. spring, or even a sustained inflation-chasing tightening later in the year."
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6:03 p.m. ET Tuesday: Stock futures drift sideways
Here's where markets were trading as the overnight session kicked off:
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S&P 500 futures (ES=F): -2.25 points (-0.05%), to 4,621.25
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Dow futures (YM=F): -19 points (-0.05%), to 35,919.00
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Nasdaq futures (NQ=F): -11.5 points (-0.07%) to 15,949.75
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter
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November 03, 2021 at 05:14AM
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