[New York Stock Market] "Negative Factors Already Priced In" 1% Rise Ahead of FOMC and Apple Earnings

The three major indices of the U.S. New York stock market all closed up over 1% on Monday, the 30th (local time), as bargain buying was confirmed ahead of key events scheduled for this week, including the Federal Reserve's Federal Open Market Committee (FOMC) meeting, earnings announcements from Apple, the largest company by market capitalization, and major economic indicators such as the employment report.

At the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 32,928.96, up 511.37 points (1.58%) from the previous session. The large-cap S&P 500 index rose 49.45 points (1.20%) to 4,166.82, and the tech-heavy Nasdaq index gained 146.47 points (1.16%) to 12,789.48. The Dow recorded its best day since June 2. The S&P 500 index emerged from a correction.

All 11 sectors in the S&P 500 posted gains. Communication-related stocks rose more than 2%. Amazon jumped 3.89% from the previous close. Big tech stocks also showed strength, with Microsoft (+2.27%), Google Alphabet (+1.87%), Meta Platforms (+2.0%), Nvidia (+1.63%), and Netflix (+3.07%) all advancing. However, Tesla fell nearly 5% amid news that Panasonic Holdings reduced battery production due to a slowdown in electric vehicle demand.

McDonald's rose more than 1.7% after reporting quarterly earnings that exceeded expectations. SoFi Technologies also gained about 1% after strong earnings and an upward revision of its annual guidance. General Motors (GM) closed slightly higher following news of a tentative agreement with the United Auto Workers (UAW) union, including wage increases.

[Image source=Reuters Yonhap News]

Investors focused on bargain buying and rebound opportunities while awaiting major events this week, such as the FOMC meeting, employment report, and Apple's earnings announcement. Last week, the S&P 500 and Nasdaq indices entered a correction territory, falling more than 10% from their previous highs. Art Hogan, Chief Market Strategist at B. Riley Financial, said, "Investors have finally gained confidence that we have sufficiently priced in the bad news, which is showing up as a stronger market today." Tom Essaye, founder of The Sevens Report, predicted, "This week will be very busy with the Fed's rate decision, important economic indicators, and corporate earnings."

The FOMC meeting scheduled for October 31 to November 1 is expected to result in a rate hold. The market consensus also favors a pause. According to the CME FedWatch tool, as of this day, the federal funds futures market is pricing in over a 98% probability that the Fed will keep rates steady at 5.25% to 5.5% during this meeting. The probability of a hold in December is also above 74%. The chance of a "baby step" hike in December stands at about 24%. Despite expectations of prolonged high rates, the market is assigning a low probability to further rate hikes this year.

Accordingly, investors will likely focus on Fed Chair Jerome Powell's press conference immediately following the meeting to gauge the direction of monetary policy after December. Attention is also on Powell's assessment of recent rises in Treasury yields and the economic and inflation outlook.

This week will also see the release of key U.S. economic indicators, including the October employment report and PMI data. The nonfarm payrolls increase, scheduled for release on November 3, is expected to be around 170,000 to 180,000. The unemployment rate is forecasted at 3.8%. Since the Fed has indicated that below-trend growth and a cooling labor market are necessary to reduce inflation, market focus is on whether signs of employment slowdown will be evident in this month's report.

Before the Fed, the Bank of Japan (BOJ) will decide on monetary policy on October 30-31. A key issue is whether there will be any mention of adjustments to the long-term interest rate cap. Previously, the BOJ maintained the long-term interest rate fluctuation range at ±0.5% but expanded the bond purchase range to ±1.0%. Besides Japan, the Bank of England (BOE) and the Norges Bank will also hold monetary policy meetings.

In the New York bond market, Treasury yields are hovering around 4.88%. The 30-year yield stands at about 5.03%, and the 2-year yield, which is sensitive to monetary policy, is at 5.04%. The dollar index, which measures the value of the U.S. dollar against six major currencies, is trading about 0.4% lower at around 106.1.

The Treasury Department's Q4 borrowing plan, which was expected to impact the bond market, was smaller than anticipated. The Treasury announced this afternoon that it plans to issue $776 billion in debt from October to December this year. This is significantly below the $1.01 trillion issued in Q3 and less than the $800 billion forecasted by JP Morgan.

Previously, concerns over the U.S. fiscal deficit had led to expectations of a surge in Treasury issuance in the second half of the year, contributing to rising Treasury yields. However, the announcement of a smaller-than-expected issuance has led to speculation that the recent sharp rise in Treasury yields may ease. The Treasury is expected to release a detailed report on the size, duration, and timing of issuance on the morning of November 1.

UBS stated in a report today that "as global growth slows and inflation eases, Treasury yields will settle at a long-term equilibrium level," forecasting that the benchmark 10-year yield will fall back to around 3.5% within 12 months. Katie Stockton, founder of Fairlead Strategies, also appeared on CNBC's Squawk Box today, suggesting that Treasury yields may have already peaked.

Additionally, Apple, the largest company by market capitalization, will release its earnings after the market closes on November 2. As a large-cap stock accounting for more than 7% of the S&P 500 index, Apple's stock movement will inevitably impact the broader market. The earnings results of major big tech companies that have already reported have shown mixed reactions depending on future earnings outlooks.

Geopolitical risks from the Middle East continue. Israel has declared the second phase of its war against Hamas and expanded ground troop deployments in the Gaza Strip, drawing attention to the future course of the conflict and possible involvement from neighboring countries including Iran. Despite geopolitical risks, international oil prices have fallen to their lowest level in about three weeks due to limited impact on oil supply. On the New York Mercantile Exchange, December West Texas Intermediate (WTI) crude oil closed at $82.31 per barrel, down $3.23 (3.78%) from the previous day. This is the lowest price since October 5.