With the FOMC interest rate policy decision due at 2:00 pm ET Wednesday, more companies reported third quarter earnings results after the close on Tuesday, including:
SK Hynix (SKHY) - Record earnings, revenue beat send Korean chip-maker up 7-8% pre-market
Visa (V) - EPS, revenue beats, shares down 1-2%
Cheesecake Factory (CAKE) - EPS, revenue beats, shares down 2-3%
Robinhood (HOOD) - Top and bottom miss, stock down 7%
Seagate (STX) - EPS, revenue beats, shares down 2.5%
Waste Management (WM) - EPS miss, revenue beat, stock lower by 4%
Prior to Wednesday's opening bell:
Boston Scientific (BSX) - EPS in-line, revenue beat, stock falls 13% on negative forecast
UBS (UBS) - EPS miss sends shares down 1%
ADP (ADP) - EPS beat, revenue in-line, shares down 3%
GE Vernova (GEV) - solid EPS beat, revenue beat, shares flat
International Paper (IP) - EPS beat, revenue miss, shares down 4%
Phillips 66 (PSX) - EPS, revenue beats, shares flat pre-open
Overnight and early morning results, outside of SK Hynix, were nothing special and investors are taking a cautious stance. As for the chip sector, the results by SKHY served to reinforce the outlook for AI buildout and will likely send the sector higher after the opening bell. The concern among investors is that the sector is already over-priced and more evidence of profitability is needed downstream, which may produce a stall out in Mag7 and other AI--related issues.
Durable goods orders for September, announced Tuesday, rose 1.8% during the month, exceeding economists' expectations for a 1.4% increase. The September advance followed a revised 0.1% rise in August. The previous month's figure had initially been reported as a 0.1% decline. Transportation led the advance, but overall, the continued rise in durable goods orders - especially at the consumer level - is a strong indicator of inflationary pressures. In hyper-inflation environments, such as Germany in the 1920s and Argentina in the 1990s, consumers bought durables such as refrigerators and cars even if they didn't need them, in hopes of purchasing at prices lower than in the future. In some instances, holding durables was far better than hoarding cash, as the currency was rapidly losing purchasing power, making large kitchen appliances, furniture, and autos almost a shadow currency that was appreciating against official government-issuance.
This is a trend that economists at the Fed will certainly be tracking. Continued upside price pressure only exacerbates inflationary tendencies and future outlooks. Even more troubling is that these purchases - as just about everything in the U.S. is today - are financed at high interest rates. Higher financing costs to consumers and government, which has to roll over debt constantly, puts a squeeze on the general economy. With more money tied up in financing, there's less room for overall growth, a paradox that has the Fed somewhat trapped. Since interest rate hikes serve to slow the economy, they are most effective on the supply side. Demand for durable goods and other essential purchases is less elastic, leaving the Fed in a bind. Raising rates may slow upside pricing, but, if demand for goods and services remains constant or increases, the net result is negligible.
It may be worth noting if Chairman Warsh mentions pricing pressure as a key element at today's press conference. With expectations for rates to stay on hold until the December meeting, pricing power in the hands of producers may be a considerable concern for which the Fed may not have ample tools to contain. The fear is that the Fed goes deeper into rate hiking policy in December, possibly pushing the federal funds rate up by 0.50% (50 basis points) rather than the traditional 0.25%.
With equity markets due to open in roughly half an hour, stock futures are mixed and moderating, with Dow futures off 100 points, NASDAQ futures off the highs of the morning but still ahead 95 points, and S&P futures up just nine points. Crude oil, gold, and silver remain in holding patterns, a likely posture until the midterms at least. WTI crude oil futures are posting a price above $101/barrel, with gold shading $4,000 and silver holding around $54 per ounce. There doesn't appear to be any catalyst to change pricing structure in these commodities and a rate hold by the FOMC will not change that outlook.
Interest rates have flattened out as well, with yield on the 10-year note knocked down to around an even 5.00% and the 30-year yield at 5.30%, both considerably lower than they were just two and three weeks ago.
Unless Chairman Warsh trips over his prepared remarks at today's 2:30 pm ET press conference, there's little to indicate anything substantial developing in the aftermath. The key event is clearly now the midterms. With Election Day and the actual results unavailable until late Tuesday night (November 3), any big, directional moves in stocks, rates, and commodities won't likely occur until Wednesday, November 4.
The current condition of market sentiment is an uncertain one and there is the potential for some swing to the downside regardless of today's FOMC decision. Warsh's press conference will be more of a focus, but the fledgling Chairman has shown considerable restraint in terms of "spilling the beans." Wall Street sharpies may take off with their own interpretation of what's said by Warsh, though their analysis is likely to be misleading. Still, the pundits and talking heads in the financial and mainstream media may not be able to constrain themselves from putting words in the Chairman's mouth.
If anything, stocks may exhibit downside pressure. That's already the case in terms of reactions to earnings. Stocks have gone nowhere in the 2+ weeks since earnings began to hit the tape (October 12), with the Dow up roughly one percent, the S&P down one percent and the NASDAQ lower by just under three percent.
At the Close, Tuesday, October 27, 2026:
Dow: 52,377.57, +15.99 (+0.03%)
NASDAQ: 26,477.81, +308.43 (+1.18%)
S&P 500: 7,722.60, +45.83 (+0.60%)
NYSE Composite: 24,210.68, +23.82 (+0.10%)
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