Morning in New York: the Fed is on the ropes

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The main event of the day will be summarizing the results of the US Fed meeting. Most forecasts agree that the regulator will go for another reduction of the key rate by 25 bps to the range of 3.75-4%. - to the range of 3.75-4%. Since this step is largely already embedded in the quotes, the most important for investors will be signals about the future course of monetary policy, especially regarding the winding down of the quantitative tightening (QT) program. We assume that Jerome Powell will not give any new rate guidance at the final press conference. It is most likely that he will repeat the thesis about the difficult situation for the regulator, in which inflation risks are shifted upwards, and employment risks - downwards. In our view, under these conditions, the main motive for the rate decision will be the balance of risks shifted towards the labor market. We expect the Fed to announce that it will stop shrinking its balance sheet starting in December. The halt in asset sales will provide an inflow of liquidity on the stock exchange.

Events related to foreign trade policy also remain in the spotlight. U.S. President Donald Trump has said that his upcoming talks with Chinese leader Xi Jinping on October 30 may raise the issue of supplying China with Nvidia's advanced Blackwell chips. While Beijing has recently increased pressure on its technology companies to divest from Nvidia (NVDA) products, Trump's suggestion could indicate that the issue has become an important agenda item in the broader talks.

Boeing (BA), Caterpillar (CAT), Verizon (VZ), Fiserv (FI), CVS Health (CVS), ADP (ADP) and Etsy (ETSY ) will report quarterly results before the open. Microsoft (MSFT), Meta (META), Alphabet (GOOG ), Mercado Libre (MELI ), ServiceNow (NOW), KLA Corp (KLAC ) and Carvana (CVNA ) will report after the end of the main session.

Futures on US indices show moderately positive dynamics. We assess the balance of risks as neutral with increased volatility on the background of the Fed meeting and Jerome Powell's press conference. We focus on S&P 500 fluctuations in the range of 6850-6950 points (from -0.6% to +0.9% to the previous session's closing level).

- A strong quarterly report and news of a joint project with Nvidia (NVDA) supported Joby Aviation (JOBY) shares, which are adding more than 8% in the premarket. The company has been selected as the exclusive partner for Nvidia's new IGX Thor platform. This collaboration should accelerate the development of autonomous flight technology.

- Visa (V) quotes show neutral dynamics after the publication of the report for the fourth quarter. The company's revenue grew 12% YoY to $10.72 bln (forecast: $10.61 bln), and adjusted EPS was $2.98 (+10% YoY), beating Wall Street's expectations.

- Mondelez (MDLZ) shares are down more than 5% after the company revised down its full-year earnings guidance. Despite quarterly revenue growth of 5.9% YoY to $9.74 billion, the company's adjusted EPS fell 24.2% YoY to $0.72. Management notes weakening demand (-4.6% by volume) due to high cocoa prices and shifting consumer preferences, which prompted the company to worsen its full-year guidance.

- Enphase Energy (ENPH) stock is down more than 8% ahead of the opening of major trading. While quarterly revenue and EPS of $410.4 million and $0.9, respectively, came in above consensus, investors were likely disappointed by the weak outlook for October-December, suggesting a decline in revenue into the $310-350 million range.

- Bloom Energy (BE) shares soared 19% before the start of the main session as its quarterly revenue climbed 57.1% YoY to $519 million, with a consensus of $428 million. The company's management said favorable macroeconomic trends, stronger power demand related to AI development, and a $5 billion agreement with Brookfield Asset Management (BAM) contributed to this result. This partnership, aimed at developing infrastructure for AI, was a key positive factor supporting the stock.

- Teradyne (TER) stock reacted with a 22% premarket gain on the release of strong quarterly results and guideposts for the fourth quarter, which put revenue in the range of $920 million to $1 billion with Wall Street consensus of $815.7 million. This was seen as a strong signal of robust demand for AI chip testing equipment.

Trades on October 28 on American stock exchanges ended mostly with growth. The S&P 500 rose by 0.23%, the Nasdaq 100 added 0.74%, the Dow Jones rose by 0.34%, and the Russell 2000 declined by 0.55%. Quotes of technology giants contributed to the positive performance, leading to a divergence of more than 110 bps between the capitalization-weighted S&P 500 and its equal-weighted counterpart. Most of the "Magnificent Seven" stocks moved upward. Nvidia (NVDA: +4.98%) was the most notable gainer on the back of news from the GTC conference. Eight out of 11 sectors included in the broad market index closed in the negative. The technology sector (XLK: +0.99%) was the leader of growth. The real estate industry (XLRE: -2.22%) was the outsider.

The direction of quotations was set by expectations related to the start of the FOMC meeting and the scheduled face-to-face talks between US President Donald Trump and Chinese President Xi Jinping on Thursday.

The Consumer Confidence Index for October amounted to 94.6 points (consensus: 93.4 points, September: 95.6 points). However, its components turned out to be contradictory. The assessment of the current situation improved: the corresponding indicator rose from 127.5 to 129.3 points. Orientations for the future deteriorated: the indicator dropped from 74.4 to 71.5 points. The ambiguous picture of consumption, in our opinion, will not have a significant impact on the Fed's decision.

An additional negative signal was the service sector business activity index from the FRB Dallas for October, which fell to -9.4 points from September's -5.6, showing the sharpest contraction since Ma.

Media reports that the White House may make concessions on tariffs in exchange for China's commitment to tighten controls on fentanyl exports are seen as another signal that the parties are ready to extend the trade truce. This supports hopes that the upcoming meeting between Trump and Xi will be constructive and mitigate one of the key market risks.

- News of a strategic nuclear energy partnership with the US government and Brookfield Asset Management (BAM: +1%) sparked a rally in Cameco shares (CCJ: +23.4%). The deal, worth at least $80 billion, calls for the construction of new Westinghouse nuclear reactors to meet growing demand for electricity.

- Nvidia (NVDA: +5%) CEO Jensen Huang dispelled fears of an AI bubble at the GTC conference and said new generations of chips are driving strong sales growth.

- Shares of DraftKings (DKNG: -5.5%) reacted negatively to news of plans by prediction platform Polymarket to relaunch in the US in the coming weeks with a focus on sports betting. This will lead to stiffer competition in the sector.

- A strong quarterly report and news of a strategic partnership with OpenAI supported the growth of PayPal Holdings (PYPL: +3.9%). The company reported quarterly revenue up 7% YoY to $8.42 bln, with EPS increasing to $1.3 (+32% YoY). Both results were above forecasts. The integration with ChatGPT opens up new opportunities to improve financial performance.

- The renewal of the partnership agreement with OpenAI, which values Microsoft's (MSFT: +2%) stake in the restructured company at $135 billion, has supported shares of the tech giant.

This article was AI-translated and verified by a human editor