[New York Stock Market] Around 1% Rise Awaiting US Midterm Elections and CPI... Dow Up 1.31%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market closed higher on the 7th (local time), a day before the midterm elections that will reshape congressional power. Besides the election this week, investors are watching key events such as the Consumer Price Index (CPI) release that could impact the market, leading to bargain hunting. There were also reports that China is considering an exit strategy from its so-called zero-COVID policy.

On this day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 32,827, up 423.78 points (1.31%) from the previous session. The S&P 500, focused on large-cap stocks, rose 36.25 points (0.96%) to 3,806.80, and the tech-heavy Nasdaq index gained 89.27 points (0.85%) to close at 10,564.52.

By sector, energy and retail stocks showed notable strength. Walgreens Boots Alliance rose 4.10% following news of its acquisition of Summit Health and an upward revision of its 2025 healthcare sales target. Home Depot and Walmart also increased by 2.20% and 1.05%, respectively. Energy stocks were buoyed by a sharp rise in natural gas prices. Marathon Oil jumped 3.12%, and Occidental Petroleum surged 3.69%.

Meta Platforms, Facebook’s parent company, rose 6.53% after reports that it would conduct layoffs this week. Apple initially fell more than 1% during the session after announcing a decline in iPhone production due to China’s COVID-19 lockdowns but ended up closing 0.3% higher. Redfin dropped nearly 10% after Oppenheimer downgraded the stock citing flaws in its business model. Carvana plunged 15.64%. Several stocks, including Tesla and Expedia, hit 52-week lows on the day. Tesla fell 5.10%, breaking below the $200 per share level.

Investors are awaiting the midterm elections scheduled for the next day and the CPI release on the 10th. In this election, which will reshape congressional power, the Republican Party is expected to secure the majority in the House of Representatives. If the Republicans also take control of the currently closely contested Senate, it is anticipated that President Joe Biden and the Democratic Party’s future policy and legislative efforts will be hampered, making an early lame-duck period inevitable.

Midterm elections have traditionally been positive for the stock market. However, this year, the Federal Reserve’s (Fed) aggressive tightening and concerns about a recession are more pronounced than in previous years, leading to analyses that the election’s impact on the market may be limited. Instead, investors appear to be focusing more on inflation indicators.

Economic media CNBC reported, "Investors want to gain additional hints from this week’s CPI on how much effort the Fed will need to lower inflation," adding, "If inflation remains high, it will signal prolonged higher interest rates and that a policy pivot is not imminent."

The market expects the October CPI to show a slight decline compared to the previous month. Sam Stovall, Chief Investment Strategist at CFRA, said, "We expect the CPI increase to slow from the peak of 9.1% in June and 8.2% in September to 7.9% in October," adding, "Investors may resume the October rally. If the CPI increase slows, the market could surge."

On the other hand, Krisa Senyak of Wolfe Research said, "Investors need to take Fed Chair Jerome Powell’s words seriously. Despite endless hopes for a pivot, the Fed Chair stuck to his 'Jackson Hole' remarks last week," diagnosing that the market has not yet bottomed. Barclays strategist Venu Krisana also suggested that a pause in Fed rate hikes may not signal a bullish market this time. He explained that while dovish policy shifts have generally been positive for the market, combined with an ongoing recession, it could instead be a bearish signal. UBS expects the S&P 500 to bottom around the 3,200 level.

On this day, the market showed some optimism following a Wall Street Journal (WSJ) report that China will gradually ease its zero-COVID policy to resume economic activities. The current Chinese leadership is reportedly considering the risk that a sudden lifting of restrictions amid new variants could increase mortality rates and reduce support for the Communist Party. Accordingly, normal economic activities similar to pre-pandemic levels are expected to be possible only near the end of next year.

U.S. Treasury yields rose ahead of this week’s inflation data, Fed officials’ speeches, and major economic indicators. In the New York bond market, the benchmark 10-year U.S. Treasury yield rose to around 4.21%. The 2-year yield, sensitive to monetary policy, stood at about 4.72%.

The dollar weakened. The Dollar Index, which measures the dollar’s value against six major currencies, hovered around the 110 level.

Oil prices fell slightly. On the New York Mercantile Exchange, December West Texas Intermediate (WTI) crude oil closed at $91.79 per barrel, down 82 cents (0.89%) from the previous session.