Investing.com - Here’s a preview of the top 3 things that could rock markets tomorrow.
1. It’s Fed Day
Wall Street hasn’t seen a Federal Reserve interest rate decision this controversial and uncertain in a long, long time, so let’s give it its due. Anything else will be a distant second when it comes to moving stocks tomorrow.
First, the numbers.
The expectation is still for the Federal Open Market Committee to raise the federal funds rate by a quarter point to a range of 2.25% to 2.50%.
The market is pricing in a 70.6% chance of a hike, according to Investing.com’s Fed Rate Monitor Tool. That’s up from yesterday’s chance of 68.9%, but down the from the 80s where it sat for a while before a host of stock selloffs shook investor confidence and raised worries about economic growth.
Since 1980, the FOMC has only hiked twice with the S&P down in the last three, six and 12 months, as it is now, Bloomberg reported.
So, while the fed fund futures are still solidly pricing in a hike, the chatter (think whisper numbers when it comes to earnings) is definitely focusing on a hold.
Adding to the uncertainty is something the market has never really seen: a president publicly and emphatically advocating for a specific Fed move, in this case to keep rates steady.
President Donald Trump’s “loud and constant criticism puts the Fed in an awkward, equally unprecedented position,” Investing.com’s Darrell Delamaide wrote. “It cannot now forgo an interest rate hike at the meeting, even if the central bank thought it best, because it would then look like Trump had bulldozed the policymakers into submission.”
If the Fed hikes, then focus will be on the dot plot of expectations for rate hikes next year. Expectations are that the central bank will pull back from its last prediction of three hikes in 2019, with the majority of traders expecting none after a December raise until at least after October.
If the Fed pauses, get ready for some major buying into the close.
2. Bears Maul Oil Prices
Eyes have been on huge swings in the Dow this week, but it’d be a mistake to ignore a 7% drop in oil today.
The selling floodgates opened after oil settled below $50 in the previous session.
Along with a continuing belief that a glut in U.S. supply will continue, traders are also betting on a dovish Fed next year to keep economic growth, and oil demand, going.
The EIA releases its weekly figures on U.S. crude inventories tomorrow at 10:30 AM ET (15:30 GMT), with traders predicting a drop of about 2.4 million barrels in stockpiles at the time of writing.
"Oil is getting no respect whatsoever at this stage and we've totally lost control of the narrative," said Phil Davis, founder of PSW Investments in New York.
3. FedEx Warns on Profit
FedEx (NYSE:FDX) could drag the broader market down tomorrow after issuing guidance well below forecasts after the bell today.
Despite beating on the top and bottom lines for its fiscal second quarter, FedEx said it would earn $15.50 to $16.60 per share, citing lower-than-expected express package volume, Briefing.com reported. That’s well below the Capital IQ consensus estimate of $17.33 per share.
FedEx fell 6% in postmarket trading.
And chip stocks will be in focus after Micron Technology (NASDAQ:MU) reported quarterly sales after the bell today that fell short of estimates.
Micron said it had sales of $7.91 billion, short of forecasts of a little more than $8 billion. But profit topped estimates.
The chipmaker also delivered downbeat outlook on the semiconductor industry, citing "weaker near-term industry supply-growth dynamics entering calendar 2019."
Shares of Micron fell 5% after hours.
In earnings tomorrow, General Mills (NYSE:GIS) reports results before the bell. Rite Aid (NYSE:RAD) will issue numbers after the market close, along with earnings from Pier 1 Imports (NYSE:PIR).