Markets Brace for a Hawkish Fed

Market Overview - The market is currently experiencing a flat trading session, with the Dow, S&P 500, and Russell 2000 all down in single digits, while the Nasdaq is down by 38 points [1] - A narrow range of trading is expected to continue until after the Federal Open Market Committee (FOMC) decision on monetary policy [1] Federal Reserve and Interest Rates - The market anticipates a third rate cut of 2025, with a -25 basis point reduction in the Fed funds rate already priced in [2] - There is expected dissension among FOMC members, with some advocating for no change and others, like Fed Governor Stephen Miran, likely supporting a 50 basis point cut [2] - The Fed's reluctance to cut rates is primarily due to ongoing inflation concerns, with the current inflation rate at +3.0% as of September [3][4] Inflation Metrics - The latest Consumer Price Index (CPI) shows a year-over-year increase of +3.0%, marking the fifth consecutive month of rising or unchanged rates [4] - A potential increase to +3.3% is anticipated for the upcoming November CPI report, based on historical trends [5] - The Personal Consumption Expenditures (PCE) index also reflects elevated inflation at +2.8% in September, up from +2.3% in April [6] Employment Cost Index - The Q3 Employment Cost Index (ECI) has dipped to +0.8%, which is the lowest since Q3 of the previous year, indicating no immediate inflationary pressures [7] Earnings Reports - Chewy (CHWY) reported favorable Q3 results with earnings of 32 cents per share, exceeding expectations, and revenues of $3.12 billion, which also surpassed estimates [8] - J. Jill (JILL) exceeded earnings expectations with 76 cents per share, outperforming the consensus by +31%, although revenues were lower than the previous year [9] - Oracle (ORCL) is expected to report fiscal Q2 earnings growth of +10.88% and revenue growth of +14.84% after the market closes [10] - Adobe Systems (ADBE) is anticipated to report fiscal Q4 earnings growth of +12% and revenue growth of +8.85% [11] - Synopsys (SNPS) is expected to report a decline of -17.94% in earnings but a revenue increase of +37.6% [12]