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E-mini S&P (December) / NQ (December)

S&P, yesterday’s close: Settled at 3768.75, down 97.25

NQ, yesterday’s close: Settled at 10,944.50, down 387.50

Fundamentals: It is the day after the Fed, but the first day of the rest of the week. And what a big week left. As confusing as yesterday’s policy meeting could appear, Chair Powell was again very deliberate in his intentions. The policy statement, released at 1:00 pm CT, introduced new language with a dovish twist, “In determining the pace of hikes, the committee will consider cumulative tightening, policy lags, and economic and financial developments.” Here, they acknowledge the need for the ‘patience’ we have referenced, how the financial system does not yet realize their hikes, and they have used other tightening methods, such as the balance sheet runoff. Markets responded favorably to this shift in rhetoric on the policy statement, but Chair Powell channeled his hawkish Jackson Hole persona during the press conference and squashed risk-assets. Powell said, “It is very premature to think about or be talking about pausing our rate hikes.” He then added, “We want to avoid making the mistake of not tightening enough or loosening too soon,” risking that inflation could become entrenched, bringing higher prices for longer. Ultimately, the Federal Reserve signaled they are willing to slow the pace of hikes but raised the terminal rate to at least 5.00-5.25%, which was already expected. At the end of the day, nothing really changed, other than price, and the Fed will remain data-dependent. Rate hike expectations have barely budged, December remains a coin flip between 50 or 75bps, and probabilities favor two 25bps hikes in each of February and March. There is a big week of economic data left. It begins with the final SPGI Services PMI for October at 8:45 am CT, followed by the more closely watched ISM Non-Manufacturing read at 9:00. Of course, tomorrow brings a pivotal Nonfarm Payroll Report.

Bill Baruch covered the post-FOMC action in yesterday’s Midday Market Minute.

We will leave you with this. Given Fed Chair Powell’s hawkishness during the press conference and how it contrasted with the policy statement, it likely sheds light on Nonfarm Payroll expectations. Yesterday’s ADP Payrolls topped expectations, and weekly Initial Jobless Claims have been strong. Furthermore, there are signs that wages finished Q3 sticky and may have only risen. However, by one measure released this morning, Unit Labor Costs for Q3 were below expectations at 3.5% versus 4.1%. Still, next week’s headline CPI is expected to rise by 0.76% MoM, the strongest in four months.

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NQ (December)

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Crude Oil (December)

Yesterday’s close: Settled at 90.00, up 1.63

Fundamentals: Crude Oil managed to settle right at $90 yesterday, but this was just before Fed Chair Powell brought down the hammer. Still, Crude Oil is battling very well relative to other commodities. Underpinning the strength are market internals, a very bullish EIA inventory report yesterday. Despite another 1.925 mb released from the SPR, Crude was -3.115 mb and Gasoline -1.25 mb, while Distillates only rose by 0.427 mb. However, news out of China is weighing on the tape after the government put to rest rumors it plans to reverse its zero-virus policy any time soon.

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Gold (December) / Silver (December)

Gold, yesterday’s close:  Settled at 1650.0, up 0.3

Silver, yesterday’s close: Settled at 19.594, down 0.073

Fundamentals: Remember, Gold and Silver settle before the FOMC policy statement is released, therefore a portion of today’s losses were already incurred upon yesterday’s electronic close. Regardless, this is an ugly session as the U.S. Dollar Index runs more than 2% from yesterday’s low and the 10-year yield rises to 4.22% on the heels of Fed Chair Powell’s hawkish press conference, discussed in detail in the S&P/NQ section. Additionally, the Chinese Yuan has slipped back to the October 25th low, the weakest since December 2007. We have beat the drum on this; metals will not be able to sustain a rally until the Yuan can manage to strengthen. Overnight, the Chinese government denied rumors it is considering relaxing its zero-virus policy. There is a big week of economic data left. It begins with the final SPGI Services PMI for October at 8:45 am CT, followed by the more closely watched ISM Non-Manufacturing read at 9:00. Of course, tomorrow brings a pivotal Nonfarm Payroll Report.

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Silver (December)

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