Stocks fall on Fed policy, focus on earnings

Stocks lost ground on Tuesday as another series of gains rolled in and investors awaited the Federal Reserve’s monetary policy meeting and jobs data later this week.

The S&P 500 (^GSPC) turned down about 0.1% in midday trade, while the Dow Jones Industrial Average (^DJI) ticked down almost 0.2%. Meanwhile, the tech-heavy Nasdaq Composite (^IXIC) fell 0.4%. All three indices were up at the start of the session.

Investors digested economic news on Tuesday, including the Job Openings and Labor Turnover Survey (JOLTS), which showed job openings unexpectedly rose to 10.7 million in September, up from 10.28 million last month. Economists had expected job vacancies to drop to about 10 million, which would have been in line with the kind of slowdown the Federal Reserve wants to see in the job market.

Meanwhile, the ISM manufacturing purchasing managers’ index fell to 50.2 in October, while economists polled by Bloomberg gave an estimate of 50.0. The ISM manufacturing employment index rose to 50.0 from 48.7 as economists polled by Bloomberg estimated 53.0.

The stock moves came after major indices lagged on Monday as investors braced for the Federal Reserve’s interest rate decision this week. Still, stocks ended October on high as the Dow posted its best monthly return since January 1976, when the index rose 14.2%, data from Bespoke Investment Group showed.

The aggressive pace of the Fed’s rate hikes has weighed on markets for much of the year, prompting investors to hope for signs the central bank is shifting its hawkish stance.

The Fed is widely expected to hike rates by 75 basis points on Wednesday at the end of its two-day monetary policy meeting, but some strategists see the bank slowing the pace going forward.

JPMorgan economist Michael Feroli sees “a move down from 75 basis points to 50 basis points and then 25 basis points before this tightening cycle ends [the] final rate is lower or that the tightening cycle is expected to end in 2022 [be] bullishly digested by stocks. The biggest risk to this view is that the CPI could come out hotter than expected next week or in December.

Regardless of the size of December’s move, “the Fed is in a difficult position because it’s very data dependent. And it’s just unclear how quickly inflation will come down,” Lisa Erickson, head of Public Markets Group, told Yahoo Finance Live on Monday.

Also on the earnings front on Tuesday:

  • Above (ABOVE): The ride-hailing giant posted a loss in the third quarter but beat analysts’ revenue estimates and saw bookings surge. Shares are up more than 14% in early trade.

  • Pfizer (PFE): The drugmaker posted a better-than-expected quarter and raised its sales guidance for the year, although higher prices offset slowing demand for COVID-19 vaccines outside the US.

  • SoFi (SOFI): The digital bank reported a lower-than-expected quarterly loss and revenue that beat analyst estimates. The fintech firm raised its guidance as the company added 4.7 million more customers by the end of the third quarter.

  • Eli Lilly and Company (LLY): The pharmaceutical company beat expectations for the third quarter but lowered its 2022 outlook citing exchange rates and tax laws.

  • Abiomed (ABMD): The maker of small heart pumps has agreed to a nearly $17 billion acquisition by Johnson & Johnson (JNJ) as the deal gives J&J access to a high-growth medical technology segment.

Advanced Micro Devices (AMD), Airbnb (ABNB), Mondelez (MDLZ) and Clorox (CLX) will also report on Tuesday.

And the week ends with the October jobs report. The Labor Department’s report is expected to show monthly payrolls falling below 200,000, while economists polled by Bloomberg estimated 190,000 jobs were added or created in the last month.

In energy markets, Brent crude, the international benchmark for oil prices, fell to $94.36 a barrel on Tuesday morning. Yields on 10-year Treasury bills fell as much as 12 basis points to below 4% before climbing back above that level later in the morning.

U.S.-listed shares of Chinese companies, including Alibaba (BABA), also rose sharply on Tuesday, amid unconfirmed social media reports that the Chinese government may be ending its tough COVID-19 policies.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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