US stock futures were subdued in morning trading Wednesday as investors awaited a decision by the Federal Reserve to withdraw the support it provided.
Dow Jones Industrial Average futures fell 71 points. S&P 500 futures fell 0.1% and Nasdaq 100 futures rose slightly. All three major averages closed at record highs on Tuesday.
Lyft rose nearly 13% in after-hours trading on better-than-expected third-quarter results. Zillow fell more than 11% after announcing it was closing its home buying and flipping business. Bed Bath & Beyond's shares rose on the announcement of a partnership with Kroger, but the nearly 70% hourly increase that followed was likely fueled by a short squeeze.
Activision shares plunged nearly 12% after it was announced that the launch of two games would be delayed. The company also issued a weaker holiday outlook as it beat earnings estimates for the quarter.
Investors are focused on the Federal Reserve, which is expected to announce the schedule for a gradual reduction in its bond-buying program on Wednesday after the close of its two-day meeting. They will also watch out for clues as to when the central bank plans to raise rates.
Fed chairman Jerome Powell is expected to stress that the reduction process known as tapering is not synonymous with tightening policy. Traders are pricing in a more aggressive route to rate hikes than the Fed expects, so Powell could try to talk the market down.
However, the Fed will also have to show that it is not ignoring the rise in inflation, which has brought the price rise to the fastest rate in 30 years.
"With the S&P 500 up 13 days in the last 15 days before the Fed begins the process of emptying the punch bowl, there is certainly great confidence that strong gains will overcome anything," said Peter Boockvar, CIO of the Bleakley Advisory Group . "However, there is a global tightening of monetary policy, not just with the Fed, and that shouldn't be ignored either."
Stocks rose Tuesday as companies continued to produce strong earnings reports. Of the S&P 500 companies that have reported so far this reporting season, 83% have exceeded consensus expectations, according to FactSet. And this despite ongoing interruptions in the supply chain, work challenges, raw material inflation, central bank policy and Covid risk.
"Stocks are like the Energizer Bunny in that they continue to make new highs and show no signs of fatigue," said Ryan Detrick, chief market strategist at LPL Financial. "We understand all of the concerns out there, but the bottom line is that earnings continue to be better than expected and help keep stocks at current levels."
In Tuesday's regular trading session, the Dow rose 138.79 points to 36,052.63 points. The S&P 500 was up 0.3% and the Nasdaq Composite was up 0.3%. All three major averages closed with records for the third time in a row. The small cap Russell 2000 rose slightly to close at an all-time high.
These highs make a potential year-end rally more conceivable for investors.
"The primary market trend appears to be higher," said Keith Lerner, co-chief investment officer at Truist. "In the eight periods since 1950 that stocks were up more than 20% through October, including this year, the S&P 500 was up 100% of the time through year-end, with an average gain of 6.2%. "
Wednesday's ADP report showed private job creation spiked in October thanks to an increase in hiring in the hospitality industry. Companies added 571,000 for the month, beating Dow Jones' 395,000 estimates, just ahead of September's revised downward of 523,000. It was the best month for Jobs since June.