[New York Stock Market] Slightly Firm While Watching FOMC... Nasdaq Down 2.8% in October

The three major indices of the U.S. New York stock market all closed higher on the 31st (local time), the last trading day of the month, as they monitored the Federal Open Market Committee (FOMC) meeting, which is taking place over two days. However, on a monthly basis, all three indices recorded declines.

At the New York Stock Exchange (NYSE), the blue-chip-focused Dow Jones Industrial Average closed at 33,052.87, up 123.91 points (0.38%) from the previous session. The large-cap S&P 500 index rose 26.98 points (0.65%) to 4,193.80, and the tech-heavy Nasdaq index gained 61.76 points (0.48%) to 12,851.24.

Although the upward trend from the previous day was confirmed, the Dow fell 1.4% over the entire month of October. The S&P 500 and Nasdaq indices also declined by 2.2% and 2.8%, respectively, during the same period. Economic media CNBC reported that all three indices recorded negative returns for three consecutive months, marking the first such streak since 2020.

On this day, all 11 sectors of the S&P 500 index rose. Real estate-related stocks increased by more than 2% as housing price indicators continued to rise. Pinterest jumped over 19% after its quarterly earnings exceeded expectations. Anheuser-Busch also rose more than 5% on strong earnings. Conversely, JetBlue fell more than 10% after releasing disappointing results. Caterpillar also slid over 6%. Tesla rose more than 1.7% following news that it won the first civil lawsuit related to a fatal accident involving its autonomous driving assistance feature, 'Autopilot,' despite concerns about weakening electric vehicle demand. NVIDIA fell nearly 1% after The Wall Street Journal (WSJ) reported that the Biden administration's tightened export controls could lead to the cancellation of orders worth billions of dollars in China.

[Image source=Reuters Yonhap News]

Investors awaited the FOMC regular meeting results, scheduled for 2 p.m. the next day, while closely watching key economic indicators and movements in Treasury yields. The Federal Reserve (Fed) is expected to keep the benchmark interest rate steady at 5.25-5.5% during this meeting, with investors paying more attention to hints about future monetary policy moves. At the September FOMC, the Fed indicated that one more rate hike could follow within the year. However, some officials have suggested that the recent rise in Treasury yields has reduced the need for further tightening, making the economic assessment and outlook from this FOMC particularly noteworthy.

The market consensus favors a rate hold. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market currently reflects over a 97% probability that the Fed will maintain rates at 5.25-5.5% in this meeting. The probability of a hold in December is also above 68%, while the chance of a 'baby step' hike in December stands at around 29%. Despite expectations of prolonged high rates, the market relatively downplays the possibility of further hikes this year.

Ross Mayfield, investment strategy analyst at Baird, said, "If the Fed steps forward and signals that rate hikes are almost over this year with dovish hints, it would help the stock market's upward momentum." Joe Davis, chief global economist at Vanguard, noted in an investor memo that even if the Fed decides to hold rates this month, the path ahead will be challenging. He stated, "Last week's GDP data and the still-strong labor market highlight the tough road the Fed faces toward achieving its 2% inflation target," adding, "One to three more hikes will likely be necessary over the next few years to firmly reach the goal."

This week, key U.S. indicators such as the October employment report and PMI will be released. The nonfarm payroll increase, scheduled for release on the 3rd, is expected to be around 170,000 to 180,000. The unemployment rate is forecasted at 3.8%. Since the Fed has emphasized the need for below-trend growth and labor market cooling to reduce inflation, market attention is focused on whether signs of employment slowdown will be confirmed in this month's report. Meanwhile, the Bank of Japan (BOJ), which recently held its monetary policy meeting, maintained its long-term interest rate target at 0% but revised the upper limit to 1%.

In the New York bond market, the benchmark 10-year U.S. Treasury yield rose slightly to around 4.91%. The 30-year yield stood at about 5.076%, and the 2-year yield, sensitive to monetary policy, hovered near 5.073%. Investors are also watching the Treasury's debt issuance plan report, to be released the next morning, to see whether the issuance of medium- to long-term bonds will decrease or increase. The Treasury's Q4 borrowing plan, expected to impact the bond market, has been scaled back more than anticipated. The Treasury announced the day before that it plans to issue $776 billion in debt from October to December this year, significantly below the $1.1 trillion issued in Q3 and less than JP Morgan's forecast of $800 billion. Efek Ozkadeskaya, senior analyst at Swissquote Bank, emphasized, "The really important event this week is the Treasury's issuance size by maturity."

Despite continued high interest rates, the housing price index hit an all-time high. According to S&P CoreLogic Case-Shiller, the housing price index in August rose 2.6% year-over-year. It also increased 0.4% month-over-month, marking seven consecutive months of gains. U.S. consumer confidence declined for the third consecutive month. According to the Conference Board, the October consumer confidence index was 102.6, exceeding market expectations of 100 but down from 104.3 in the previous month.

After the market closes on the 2nd, Apple, the largest company by market capitalization, will release its earnings. As a large-cap stock accounting for over 7% of the S&P 500 index, Apple's stock movement will inevitably impact the overall market immediately. The earnings reports from major big tech companies released earlier showed mixed results depending on future earnings outlooks. According to LSEG, among the 251 S&P 500 companies that have reported earnings so far, 77.7% have exceeded Wall Street expectations.

The dollar index, which measures the value of the U.S. dollar against the currencies of six major countries, is trading around 106.6, up 0.5%. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as Wall Street's "fear gauge," has dropped more than 8%, standing near 18.

Oil prices fell for the second consecutive day. On the New York Mercantile Exchange, December delivery West Texas Intermediate (WTI) crude oil closed at $81.02 per barrel, down $1.29 (1.57%) from the previous day. Despite ongoing geopolitical risks in the Middle East, weak economic data from China and Europe are believed to have influenced the decline.