US pre-open: Stocks to edge down ahead of Fed

(Sharecast News) - US stock futures pointed to a weaker open on Wall Street on Wednesday as investors eyed a rate announcement from the Federal Reserve. At 1240 GMT, Dow Jones Industrial Average and S&P 500 futures were down 0.3%, while Nasdaq futures were 0.2% lower.

Oanda market analyst Craig Erlam said: "We're seeing some trepidation in markets on Wednesday ahead of the Federal Reserve meeting later in the session and the jobs report on Friday.

"The Fed meeting should be quite straightforward, with policymakers having come out in force to soothe market fears of another rate hike from the central bank, claiming recent moves in bond markets may have done some of the job for them.

"This followed previous commentary that strongly hinted that another rate hike is likely, aligning with the dot plot from the September meeting, while warning that rates will stay high for a long time.

"With no new forecasts due today, it's all about the tone from policymakers and Chair Jerome Powell, and with bond yields still near their recent highs, I see little chance of another shift."

Erlam expects the Fed Funds Rate to be left unchanged at 5.25-5.5% and for the corresponding commentary to be "almost a carbon copy" of recent statements. "This isn't the time to tweak as the economic data hasn't yet justified it either way, particularly to policymakers who are not going to pivot until they're absolutely certain they've defeated inflation," he said.

On the macro front, the ADP employment report - widely seen as a pre-cursor to Friday's non-farm payrolls report - showed the US economy added fewer jobs than expected in October, though figures indicated a "well-rounded jobs picture".

Private employers added a net 113,000 jobs last month, following the 89,000 jobs created in September, which was the slowest pace of growth since January 2021. The consensus estimate was for a reading of 150,000.

Meanwhile, ADP said that annual pay for people in the same job was up just 5.7% year-on-year - the slowest pace of growth since October 2021. Wage increases for job-changers was 8.4% - the smallest increase since July 2021

"No single industry dominated hiring this month, and big post-pandemic pay increases seem to be behind us," said Nela Richardson, chief economist at ADP. "In all, October's numbers paint a well-rounded jobs picture. And while the labour market has slowed, it's still enough to support strong consumer spending."

Still to come, the S&P Global manufacturing PMI for October is at 1345 GMT, while JOLTS job openings for September, the ISM manufacturing PMI for October and construction figures for September are all due at 1400 GMT.

On the corporate front, Wayfair shares slumped 8% in pre-market trade after the online retailer's third-quarter revenue missed expectations.

Paycom Software tumbled 38% in pre-market trade after it downgraded its annual outlook.

Cosmetics company Estée Lauder was also likely to be under pressure after cutting its outlook for fiscal 2024. The company pointed to incremental external headwinds, namely from the slower growth in overall prestige beauty in Asia travel retail and in mainland China.

Pharmacy operator CVS was also set to be in focus after its third-quarter results beat expectations, partly due to a strong performance from the health services division.