Stock Market Today: Dow Holds Near Record High as Fed Decision Looms - Barron's

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All eyes will turn to the U.S. Federal Reserve as the central bank considers monetary policy.

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The stock market was holding near record highs Tuesday, as investor attention turned squarely to the U.S. Federal Reserve’s looming decision over ending its Covid-19 pandemic-era program of stimulus.

Futures for the Dow Jones Industrial Average indicated an open 15 points lower, after the index rose 94 points Monday to close at 35,913. Futures for the S&P 500 and Nasdaq signaled a similar start. All three indexes ended Monday at fresh record highs.

Overseas, Tokyo’s Nikkei 225 slipped back 0.4%, paring gains after a Monday rally cheering weekend election results. In London, the FTSE 100 was 0.6% lower, weighed down by declines in the energy and mining sector, which are heavily-weighted in the U.K.’s leading stock index.

As stocks trade at all-time highs amid optimism over strong corporate earnings and a recent deal between the U.S. and European Union to reduce tariffs, a week of central bank decisions as well as key economic data lies ahead.

The latest meeting of the Federal Open Market Committee (FOMC)—the Federal Reserve’s monetary-policy body—gets under way Tuesday, and will wrap up Wednesday with a statement from Fed Chair Jerome Powell.

It’s largely expected that the central bank will announce that it will begin slowing, or tapering, its pandemic-era program of monthly asset purchases, which add liquidity to markets. Investors could react to any substantial updates.

“Tomorrow should see a tapering of quantitative easing announced by the Fed at the FOMC. Chairman Powell will likely offset that by emphasizing no rate hikes are on the horizon while continuing to beat the transitory drum,” said Jeffrey Halley, an analyst at broker Oanda. Whether or not recent spikes in inflation are transitory or more long-lasting has been a familiar debate for investors in recent months.

“I believe the taper trade has not been priced in by markets and there is room for the U.S. Dollar and U.S. yields to spike higher as reality sets in,” Halley added. “U.S. equities may be record highs right now, but we can expect a lot more two-way price action instead of one-way traffic into the end of the year and into Q1 2022.”

It was the Royal Bank of Australia that got the week of central bank decisions off to a start, announcing Tuesday that it would tighten monetary policy and abandon its goal of keeping the yield on three-year bonds to 0.1%. There will also be an announcement Wednesday from the Bank of England.

On the U.S. economic front, data releases this week cover key measures of the labor market, manufacturing, and services, with the highlight being the U.S. jobs report Friday.

“It may be a pretty busy macro week with the Fed, Bank of England and the U.S. jobs report, but the OPEC+ meeting on output this Thursday could also be a vital one for the global economy in light of the resurgence in energy prices lately,” said Jim Reid, a strategist at Deutsche Bank.

The Organization of the Petroleum Exporting Countries and its affiliates—a group that includes Saudi Arabia and Russia—meet against the backdrop of a surge in energy prices. Futures for the U.S. crude benchmark, West Texas Intermediate, were trading around $84.30 a barrel, near yearly highs.

But other commodity prices fell, with Chinese iron ore futures plunging amid slowing steel output in China. Futures for iron ore to be delivered in China for November fell more than 6% Tuesday—down almost 20% in the last five days alone—as contracts for December delivery slipped 5.7%. Steel output fell 2% in the final third of October to the lowest levels since March 2020, according to data from Chinese market intelligence group Mysteel.

With corporate earnings season still under way, companies reporting results Tuesday include BP (BP), ConocoPhillips (COP), Cummins (CMI), DuPont (DD), Estée Lauder (EL), Pfizer (PFE), Lyft (LYFT), T-Mobile US (TMUS), Zillow (Z), and others.

Here are 10 stocks on the move Tuesday

BP (BP) fell 2.6% in London after reporting third-quarter earnings which beat expectations, but left analysts curious about investments in low-carbon projects amid a windfall of cash. That seemed to weigh on Shell (RDSA), which slipped 1.5% in London. Both companies’ U.S.-listed stocks were on pace for similar declines.

Metals and mining giants listed in London tumbled amid the pressure on iron prices. Rio Tinto (RIO) was down 2.8%, Anglo American (AAL) fell 3.9%, BHP (BHP) slipped 3.4%, Antofagasta (ANTO) declined 3%, Glencore (GLEN) decreased 2.8%, and Fresnillo (FRES) moved 1.3% into the red. 

Flutter (FLTR) fell 7.3% in London after the gambling group cut its full-year guidance amid results that favored gamblers. It now expects 2021 adjusted earnings to be between £1.24 billion ($1.7 billion) and £1.28 billion, down from a previous forecast of £1.27 billion to £1.37 billion.

HelloFresh (HFG) soared 13.9% in Frankfurt after the meal kit delivery group beat third-quarter earnings estimates and raised its sales outlook based on the rising number of customers and high order rates.

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