Daily Market Color November 1, 2017Fed Holds Benchmark Rate Steady, Keeps December Hike Target Jeff Davenport Fed Favors Hiking in December The FOMC meeting announcement was the central focus of financial markets today, as the Fed made the decision to hold its target range for the benchmark interest rate unchanged at 1%-1.25% and maintain its current outlook for an additional rate hike at its December meeting (88% probability as per Fed Fund futures). The accompanying statement cited a further decline in the unemployment rate, expansion in household spending, and growth in business investment in support of the Fed’s belief that “economic activity has been rising at a solid rate despite hurricane-related disruptions.” References to inflation in the text remained in-line with the previous statement – “Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term.” A word for word comparison of today’s FOMC statement vs. the text from September’s policy meeting can be found here. US financial markets traded within a tight range again today as the FOMC decision provided no surprises ahead of President Trump’s decision on the next Fed chair. Republican lawmakers’ decision to delay the publication of their proposed tax bill until tomorrow, a move which again highlights the complexities that lie ahead for the Trump administration in getting a passable bill before year end, also kept markets in check. In equity markets, the DJIA and S&P 500 edged 0.2% higher while the tech-heavy Nasdaq declined 0.2%. US Treasurys are poised to finish the session close to unchanged, with the 10-year note yield near 2.37% heading into tomorrow’s events. In commodities, WTI crude futures rose on supply speculation at the beginning of the session before ultimately closing lower on the day after the EIA reported a smaller than expected drawdown in US crude stockpiles. A barrel of WTI declined $0.10 from its eight-month high to $54.30. Data Comes in Support of Fed Optimism The ADP national employment report for October was released today, displaying the number of new hires by private employers in the US at a seven-month high of 235,000. The figure represents a significant uptick from September’s 110,000 downwardly revised level (135,000 initial reading), driven by a surge in post-hurricane construction jobs. Additionally, steady employment gains were observed across most major industries, with the service sector adding 150,000 jobs while employment in goods-producing industries rose 85,000. Often a leading indicator for the Labor Department’s more comprehensive employment report, today’s ADP figure foreshadows robust gains in Friday’s nonfarm payrolls figure, with current expectations pointing towards a 313,000-monthly increase for October after a storm-influenced 33,000 decline in the prior month. Also released today, the Institute for Supply Management’s index of factory activity provided a positive picture of the manufacturing sector during October. The 58.7 reading, although a decline from the prior month’s 13-year high of 60.8, displayed robust levels of new orders and export orders for a second consecutive month. Of the 18 industries captured in the report, 16 reported growth in October while 2 remained unchanged. The overall ISM manufacturing index has now held over 55 for five consecutive months, resolutely holding well above the 50 point threshold associated with expansion.