Markets climb after Fed leaves rates unchanged again

Dow went up 221, advancers over decliners 2-1 & NAZ gained 210.  The MLP index added 2 to 246 & the REIT index edged up 1+ to the 329s.  Junk bond funds were in strong demand after recent selling & Treasuries had more buying which reduced yields.  Oil slipped back under 81 & gold was off 10 to 1983 (more on both below).

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The Federal Reserve again held benchmark interest rates steady amid a backdrop of a growing economy & labor market & inflation that is still well above the central bank's target.  In a widely expected move, the Fed’s rate-setting group unanimously agreed to hold the key federal funds rate at 5.25-5.50%, where it has been since Jul.  This was the 2nd consecutive meeting that the Federal Open Market Committee chose to hold, following a string of 11 rate hikes, including 4 in 2023.  The decision included an upgrade to the committee's general assessment of the economy.  The post-meeting statement indicated that “economic activity expanded at a strong pace in the third quarter,” compared with the Sep statement that said the economy had expanded at a “solid pace.”  The statement also noted that employment gains “have moderated since earlier in the year but remain strong.”  The GDP expanded at a 4.9% annualized rate in the 3rd qtr, stronger than even elevated expectations.  Nonfarm payroll growth totaled 336K in Sep, well ahead of the outlook.  There were few other changes to the statement, other than a notation that both financial & credit conditions had tightened.  The addition of “financial” to the phrase followed a surge in Treasury yields that has caused concern.  The statement continued to note that the committee is still “determining the extent of additional policy firming” that it may need to achieve its goals.  “The Committee will continue to assess additional information and its implications for monetary policy,” the statement said.  The decision to stay put comes with inflation slowing from its rapid pace of 2022 & a labor market that has been surprisingly resilient despite all the interest rate hikes.  The increases have been targeted at easing economic growth & bringing a supply & demand mismatch in the labor market back into balance.  There were 1.5 available jobs for every available worker in Sep, according to the Labor Dept.  Core inflation is currently running at 3.7% on an annual basis, according to the latest personal consumption expenditures price index reading, which the Fed favors as an indicator for prices. While that has decreased steadily this year, it is well above the Fed's 2% annual target. The post-meeting statement indicated that the Fed sees the economy holding strong despite the rate hikes, a position in itself that could prompt policymakers into a prolonged tightening stance.  In recent days, the “higher-for-longer” mantra has become a central theme for where the Fed is headed.  While multiple officials have said they think rates can stay where they are as the Fed assesses the impact of the previous increases, virtually none have said they are considering cuts anytime soon.  Market pricing indicates the first cut could come around Jun 2024, according to CME Group data.  The restrictive stance has been a factor in the surging bond yields.

Fed holds rates steady, upgrades assessment of economic growth

US job openings rose more than expected for the 2nd month in a row as the labor market remains surprisingly resilient in the face of the Federal Reserve's aggressive interest-rate hike campaign.  The Labor Dept said there were 9.6M job openings in Oct, an increase from the downwardly revised 9.5M openings reported the previous month.  The forecast expected a reading of 9.2M.  The Federal Reserve closely watches these figures as it tries to gauge labor market tightness & wrestle inflation under control.  The higher-than-expected figure indicates that demand for employees still outpaces the supply of available workers.  The central bank has responded to the inflation crisis & the extremely tight labor market by raising interest rates at the fastest pace in decades.  Officials have so far approved 11 rate hikes, lifting the federal benchmark funds rate to the highest level since 2001.  Policymakers have signaled that an additional rate hike is on the table this year if economic data points to a resurgence in price pressures.  The latest jobs data could give policymakers more space to hike rates & hold them at elevated levels for longer.  The uptick in vacancies last month largely stemmed from bars & restaurants as well as arts, entertainment & recreation services, according to the report.  Job openings remain historically high.  Before the COVID-19 pandemic began in early 2020, the highest on record was 7.6M.  There are roughly 1.5 jobs per unemployed American.

Job openings unexpectedly rise for second straight month

Netflix (NFLX) said its cheaper, ad-supported tier has amassed 15M global monthly active users.  That's triple the most recent figure, disclosed in May & notable growth for NFLX as it laps a year since rolling out the new subscription option.  The streaming giant introduced its ad-supported plan alongside a password-sharing crackdown in an effort to drive revenue amid slowing subscriber growth.  The move has proved fruitful so far.  In its 3rd-qtr report, NFLX said it added 8.8M subscribers, more than expected, & that it expects a similar bump in subscriber growth in the 4th qtr.  Newly instated Pres of Advertising Amy Reinhard said that advertisers can now choose to run 10-, 20-& 60-second ads, in addition to the 15- & 30-second spots offered.  The move will allow advertisers “around the world multiple formats to leverage,” Reinhard added.  Members of the ad tier can also expect some new features coming their way.  NFLX said it will roll out higher 1080p streaming resolution for ad tier users in addition to 720p.  Users will also be able to download movies & series to their devices starting at the end of this week.  The stock went up 8.50.
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Netflix ad-supported tier has 15 million subscribers, triple the previous count

Gold futures settled with a loss, then moved a bit higher in the electronic trading shortly after the Federal Reserve announcement.  The central bank agreed to leave its benchmark fed funds rate unchanged at 5.25-5.50%, while also keeping the option open for a further interest-rate hike.  The Federal Open Market Committee decision, albeit not raising rates, is a bit hawkish as they raised economic growth numbers.  Strong labor & inflation data is going to support the higher-for-longer; mantra the Fed is communicating.  Although this would be seen as negative for gold, the FOMC also mentioned tighter financial conditions as a risk.  Dec gold was at $1988 an ounce shortly after the Fed announcement.  That follows a settlement at $1987 an ounce, down $6 for today's session.

Gold Prices Settle Lower, Edge Up After The Fed Statement

West Texas Intermediate (WTI) crude closed with a 3rd-straight loss, surrendering early gains as worries over a widening Middle East war faded & US inventories rose.  WTI crude for Dec closed down 58¢ to settle at $80.44 per barrel, the lowest in 2 months, after trading as high as $83.52 earlier in the session.  Jan Brent crude, the global benchmark, was last seen down 34¢ to $84.68.  The drop came as traders again lowered the war-risk premium again, while the Energy Information Administration's weekly survey showed US oil inventories rose by 0.8M barrels last week while US oil production is at a record 13.1M barrels per day.  The fading war premium comes despite yesterday's bombing of a Gaza refugee camp was condemned by other Middle East countries as it targeted a senior Hamas commander & a tunnel network beneath the camp, but the opening of a passage from Gaza into Egypt for foreigners & some Palestinians eased concerns.

WTI Closes Lower, Surrenders Early Gains as War Fears Fade and US Inventories Rise

Dow rose after Powell's comments following the meeting.  The rise was good but less than impressive.  While safe haven gold was sold, Treasuries had a lot of buying today.  Dow bounced off its latest low although many negative factors for stocks remain.

Dow Jones Industrials