The Federal Reserve confused the markets somehow yesterday by delivering a dovish 75bps hike, but on the other hand, the Federal Reserve’s chairman showed a clear hawkish tone during the press conference. The market rallied right after the decision and tumbled back during the press conference.
What Does It Mean?
To start with, at least the Federal Reserve mentioned clearly that at some point it will be appropriate to slow rate hikes, and such a decision might come as soon as the December meeting. This is considered a positive factor for equities. However, the chairman kept the door open for all possibilities and did not change the idea of further inflation risk, which somehow led the market to believe that a pause is not on the table anytime soon.
Despite the decline that we saw yesterday, markets are trying to stabilize, SPX is still down by 0.4% on the day but showing some dip buying. In the meantime, the daily chart is still suggesting a higher low and that the downside pressure is another short-term retracement before the upside trend resumes.
Eyes on NFP Tomorrow
It’s not a surprise that today’s volatility dried up quickly after the opening since everyone will be waiting for the US jobs report tomorrow. Estimates point to another softer report, with 197K new jobs in October compared to 263K in September. This would be the lowest job creation this year, while unemployment is set to rise towards 3.6% up from 3.5%. What matters the most here is wage growth which is expected to rise by 0.3% matching the past two months.
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