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Fed Meeting: Will They Serve Up Interest Rates or Keep the Economy on the ‘Hold’ Setting?

The U.S. Federal Reserve is about to embark on its latest meeting, and the suspense is palpable. While they’re expected to keep interest rates parked at a cozy 5.25% to 5.50%, it’s like waiting to see if your favorite TV show will end on a cliffhanger. The Fed’s plans for the rest of the year are shrouded in mystery, especially after last week’s headline consumer prices shot up like they were auditioning for a superhero movie, while core prices slowed down as if they were enjoying a leisurely stroll. All eyes and ears will be on Fed Chair Jerome Powell at the forthcoming press conference, where he might drop some wisdom about the Fed’s fall fashion lineup.

And that’s not all, folks! The Fed will also whip out its crystal ball to provide the latest set of economic projections. Pay close attention to the year-end projection for inflation; it’s like reading tea leaves to predict what might happen at the November and December policy meetings. Will it be hot or cold on the monetary policy front? Stay tuned!

Moving Markets

Fed meeting looms, more tech IPOs ahead, Evergrande slips – what’s moving markets

U.S. futures point higher, with markets almost certain that Federal Reserve policymakers will hold interest rates steady following a much-anticipated policy-setting meeting that starts on Tuesday. Elsewhere, Instacart shares are set to begin trading in New York after the online grocery delivery service priced its initial public offering at the top-end of its target range, while the United Auto Workers union warns of further U.S. plant closures if fraught negotiations with three major carmakers show no signs of progress.

1. Futures edge higher ahead of Fed meeting

U.S. stock futures held above the flatline, as investors looked ahead to the beginning of a two-day Federal Reserve policy meeting on Tuesday.

At 05:22 ET (09:22 GMT), the Dow futures contract had added 20 points or 0.1%, S&P futures inched up by 3 points or 0.1%, and Nasdaq 100 futures were mostly unchanged.

The main indices on Wall Street posted positive sessions on Monday, buoyed by a fresh jump in oil prices that bolstered shares in energy companies like ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX). A move earlier this month by Saudi Arabia and Russia to extend production cuts has recently pushed up crude prices to multi-month highs.

Chipmakers, however, remained under pressure after Taiwan’s TSMC reportedly asked its main suppliers to delay the delivery of top-end manufacturing equipment. British semiconductor designer Arm (NASDAQ:ARM), which last week completed the biggest initial public offering in nearly two years, saw its shares slip by 4.5% in New York, as traders fretted over broader economic uncertainty.

2. Fed gathering in focus

The Federal Reserve is widely tipped to keep interest rates unchanged after policymakers wrap up their meeting on Wednesday, with Investing.com’s Fed Rate Monitor Tool showing that markets are all but certain that borrowing costs stay put at a range of 5.25% to 5.50%.

But the U.S. central bank’s plans for the rest of 2023 are still somewhat mysterious. After this month, Fed officials will have two more closely-watched gatherings this year to decide whether another rate hike is warranted to prevent recently cooling inflation from accelerating.

Data last week showed that a surge in petrol prices drove a spike in consumer price growth in August to its fastest rate in 14 months, although the annual “core” reading stripping out food and fuel was the slowest in two years. The numbers helped solidify expectations that the Fed will refrain from resuming a long-standing tightening campaign in September.

Meanwhile, there is currently less than a 40% chance that interest rates will be lifted again this year, according to the Fed Rate Monitor Tool. Yet with signs indicating a rise in car and health insurance costs, as well as a potential increase in vehicle prices stemming from an ongoing auto workers strike, some economists see upside risks to inflation.

What the Fed has to say about the future development of price gains will likely factor into the reaction to this week’s meeting.

3. Instacart’s top-end IPO pricing

Instacart has priced its initial public offering at $30 a share, hitting the top-end of an upwardly revised target range, in the latest sign of a renaissance in the once-dormant market for new listings.

The San Francisco-based company raised $660 million from the sale of 22 million shares. The shares are set to start trading on the Nasdaq on Tuesday.

The online grocery delivery service’s share sale gives it a valuation of $9.9 billion on a fully diluted basis, albeit at a fraction of the $39 billion value assigned to the company by bullish private investors in March 2021 during a pandemic-era boom in at-home food orders.

Even still, Instacart’s announcement was a marker of a nascent recovery in an IPO market that had been quieted by economic jitters and elevated interest rates. Separately on Monday, marketing and data automation group Klaviyo improved its IPO pricing range ahead of the public debut of its shares this week.

Fueling the optimistic sentiment has been strong demand for Arm’s flotation, which saw shares in the SoftBank-backed firm soar well above their own top-end pricing in their inaugural trading day last Thursday.

4. UAW threatens more U.S. plant strikes

The United Auto Workers union has warned that more U.S. factories would go on strike if no progress is made in talks with automaking giants Ford (NYSE:F), General Motors (NYSE:GM) and Jeep-manufacturer Stellantis (NYSE:STLA).

In a video message on Monday, UAW president Shawn Fain flagged that recent talks had proved fruitless, adding that the union was not going to allow the Detroit Three car companies to “drag this out.” The union and the firms are at odds over pay and employee benefits.

More work stoppages could be announced on Friday, Fain said. Walkouts at plants in Michigan, Ohio and Missouri have already halted production of popular models like the Ford Bronco, Jeep Wrangler and Chevrolet Colorado.

U.S. Treasury Secretary Janet Yellen noted that it was still too early to tell how the strikes may affect the wider economy, saying the impact may depend on how long the labor actions last.

5. Oil extends recent rise

Oil prices jumped on Tuesday, rising for the fourth consecutive session, as recent supply concerns were exacerbated by the release of a weak U.S. shale production forecast.

U.S. oil output from top shale-producing regions is on track to fall for a third month in a row in October to the lowest level since May 2023, the U.S. Energy Information Administration said in its monthly drilling productivity report on Monday.

This has added to fears of a substantial supply deficit this year stemming from the extended production cuts by Saudi Arabia and Russia.

By 05:23 ET, the U.S. crude futures traded 0.8% higher at $91.28 a barrel, while the Brent contract climbed 0.5% to $94.92. Prices have gained for three consecutive weeks, and are now hovering around 10-month highs for both benchmarks.

Source: Investing.com

AutoZone (NYSE: AZO), the gearhead’s paradise for all things automotive, has strutted onto the financial stage with its fourth-quarter results that have analysts rubbing their eyes in disbelief. Clocking in at a whopping $46.46 per share, their earnings left the consensus estimate of $45.22 in the dust, as if it were just a discarded lug nut. Not to be outdone, their quarterly revenue revved its engine to $5.69 billion, leaving the predicted $5.62 billion coughing in the exhaust fumes. U.S. same-store sales saw a sprightly 1.7% boost, proving that even in the world of auto parts, every engine can use a little extra horsepower.

Instacart Unleashes Its IPO Fury on Nasdaq: A Fresh Breeze in the IPO Desert

Instacart, the grocery delivery app sensation, was all set to make its grand Nasdaq entrance, following in the footsteps of SoftBank’s Arm Holdings, which strutted onto Wall Street like a rockstar. If this IPO kicks off with as much gusto as Arm and RayzeBio did last week, it might just inject some life into the IPO market, which has been drier than a desert for nearly a year and a half. Instacart, hailing from the foggy city of San Francisco, confidently slapped its IPO price tag at the tippy-top of its range, scooping up a cool $660 million in the process.

Of that bounty, $237 million is earmarked for investors who decided it’s a good time to cash in some of their Instacart chips. At nearly $9.9 billion, Instacart’s new valuation might seem like chump change compared to its 2021 glory days when it was worth $39 billion. Oh, how the grocery bags have turned!

Investing is like planting seeds in a financial garden and watching your money grow while sipping on a cup of compound interest tea. It’s the art of making your dollars do the cha-cha-cha, dancing their way into a brighter future. So, whether you’re into stocks, real estate, or even collecting rare Beanie Babies (hey, they might make a comeback), remember that investing is the closest thing we have to a financial time machine. Time to dust off that crystal ball and let your money do the talking.