The Dow Jones Industrial Average dipped from its record on Wednesday as investors awaited a decision from the Federal Reserve on its move to start withdrawing the support it has been providing.
The Dow slipped about 140 points, dragged down by Amgen and Chevron. The S&P 500 fell 0.1%. The Nasdaq Composite rose 0.1% after hitting an intraday record shortly after the open. The small-cap benchmark Russell 2000 rose 1.1% to a new intraday high, bringing its weekly gains to nearly 4%.
Zillow fell more than 21% after announcing it will close its home buying and flipping business. Shares of Bed Bath & Beyond rose on a partnership announcement with Kroger but the 20% surge that followed was likely fueled by a short squeeze.
Activision shares tumbled, falling about 15% after it said the launch of two games would be delayed. The company also issued a weaker holiday outlook though it did beat profit estimates for the quarter.
Investors are focused on the Federal Reserve, which is expected to announce the timeline for a gradual reduction in its bond-buying program Wednesday at the conclusion of its two-day meeting. They’ll also be listening for clues on when the central bank plans to raise interest rates.
Fed Chairman Jerome Powell is expected to stress that the reduction process known as tapering does not equate to tightening policy. Traders are pricing in a more aggressive path of interest rate hikes than the Fed is anticipating, so Powell may try to talk the market down.
“With the S&P 500 up 13 days in the past 15 ahead of the Fed beginning the process of draining the punch bowl, there certainly is a lot of confidence that strong earnings will overcome everything,” said Peter Boockvar, Bleakley Advisory Group’s CIO. “That said, global monetary tightening is taking place, not just with the Fed, and that should not be ignored either.”
The central bank will also have to show that it’s not ignoring the rise in inflation that has resulted in the fastest increase in prices in 30 years.
Equities rose to new records on Tuesday as companies continued to deliver strong earnings reports. Of the S&P 500 companies that have reported so far this earnings season, 80.9% of them have beat consensus expectations, according to FactSet. That’s despite ongoing supply chain disruptions, labor challenges, commodity inflation, central bank policy and Covid risk.
“Stocks are like the Energizer Bunny, as they continue to soar to new highs and show no signs of tiring,” said Ryan Detrick, chief market strategist for LPL Financial. “We understand all of the worries out there, but the bottom line is earnings continue to come in way better than expected and are helping to justify stocks are current levels.”
All three major averages closed at records for the third session in a row. The small-cap Russell 2000 rose slightly and closed at an all-time high. Those highs are making a potential year-end rally more conceivable to investors.
“The primary market trend appears higher,” said Keith Lerner, co-chief investment officer at Truist. “In the eight periods since 1950 where stocks were up more than 20% through October, as they are this year, the S&P 500 tacked on additional gains by year end 100% of the time with an average gain of 6.2%.”
Wednesday’s ADP report showed that private job creation rose in October, thanks to a burst in hiring in the hospitality sector. Companies added 571,000 for the month, beating the 395,000 Dow Jones estimate and just ahead of September’s downwardly revised 523,000. It was the best month for jobs since June.