[New York Stock Market] One Day Before Presidential Election, Broad Decline... Heightened Caution Amid Uncertainty

Narrow Victory Expected... Increased Market Uncertainty
Safe-Haven Demand Drives Down Treasury Yields
Nvidia Rises Ahead of Dow Inclusion on 8th
FOMC Scheduled for 7th... Small Rate Cut Anticipated

The three major indices of the U.S. New York stock market all closed lower on the 4th (local time), the day before the presidential election. As uncertainty increased a day before the U.S. presidential election on the 5th, investors' caution spread. This week, the market is expected to sequentially digest the presidential election the next day and the Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve (Fed) scheduled for the 7th.

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 41,794.6, down 257.59 points (0.61%) from the previous trading day. The large-cap-focused S&P 500 index fell 16.11 points (0.28%) to 5,712.69, and the tech-heavy Nasdaq index dropped 59.93 points (0.33%) to close at 18,179.98.

By stock, AI leader Nvidia rose 0.48%. Nvidia will be included in the Dow Jones Industrial Average starting from the 8th, replacing Intel. Sherwin-Williams also rose 4.59% on news of its inclusion in the Dow Jones Industrial Average. Talen Energy fell 2.23%. The news that the U.S. Federal Energy Regulatory Commission (FERC) rejected Talen Energy's request to increase the amount of power supplied from the Susquehanna nuclear power plant to Amazon data centers acted as a negative factor. Constellation Energy and Vistra fell 12.46% and 3.15%, respectively. Trump Media & Technology (DJT), the operator of the social networking service Truth Social owned by former Republican presidential candidate Donald Trump, surged 12.37%.

The market is focusing on the results of the U.S. presidential election to be held on the 5th. Democratic candidate Vice President Kamala Harris and former President Trump are engaged in a neck-and-neck race until the last moment, making the outcome unpredictable. According to PBS News on that day, a poll conducted nationwide from October 31 to November 2 with 1,297 voters showed Vice President Harris with 51% support, leading former President Trump (47%) by 4 percentage points (margin of error ±3.5 percentage points).

The key battleground states show mixed results depending on the polling agency. According to polls released by the political media outlet The Hill and Emerson College on that day, former President Trump led Vice President Harris in Pennsylvania, North Carolina, Georgia, and Arizona. Vice President Harris led Trump in Michigan. In Nevada and Wisconsin, the two candidates were tied. This is the exact opposite of the previous day's poll results. The previous day's New York Times (NYT) and Siena College poll showed Vice President Harris leading with 4 wins, 2 ties, and 1 loss. Harris led in Nevada, North Carolina, Wisconsin, and Georgia, and tied with Trump in Pennsylvania and Michigan. Trump led only in Arizona. However, in the battleground state polls released for two consecutive days, neither candidate secured a clear lead beyond the margin of error, leading to an analysis that the race is effectively tied in terms of support.

Chris Larkin, Managing Director of Investments at Morgan Stanley E*TRADE, said, "Generally, the Fed's interest rate announcement dominates weekly discussions, but not this week," adding, "Traders and investors awaiting the election results should prepare for the possibility of delayed results and the potential impact of uncertainty on the market."

Michael Gjesdal, strategist at Morgan Stanley, said, "The U.S. presidential election is very important, but there is a high likelihood of significant noise during the process," and added, "What will make the difference between navigating through the noise and getting lost in it will be patience and planning."

Equally important as the election results is which party, Democratic or Republican, will hold the majority in Congress. If the two parties split control of the House and Senate, the current status quo will be maintained, and the impact on the market is likely to be limited. On the other hand, if either the Democrats or Republicans control both the House and Senate, significant policy changes could occur in government spending or tax cuts.

Investors are also paying attention to the FOMC regular meeting scheduled for the 6th and 7th, after the election. The Fed is expected to cut interest rates again by 0.25 percentage points in November, following its first rate cut from 5.25-5.5% to 4.75-5.0% in September. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day reflected a 98% probability that the Fed will cut rates by 0.25 percentage points at the November FOMC meeting. Investors' main focus is expected to be on Fed Chair Jerome Powell's press conference, which may provide hints about the pace of future rate cuts rather than the size of this rate cut.

Due to increased demand for safe-haven assets amid election uncertainty, government bond yields are declining. The U.S. 10-year Treasury yield, a global bond yield benchmark, fell 6 basis points (1bp=0.01 percentage points) from the previous trading day to 4.3%, and the U.S. 2-year Treasury yield, sensitive to monetary policy, dropped 2 basis points to 4.17%.

International oil prices rose on news that the Organization of the Petroleum Exporting Countries (OPEC) and the non-OPEC major oil-producing countries group OPEC+ decided to postpone the planned oil production increase scheduled for December by one month. West Texas Intermediate (WTI) crude oil closed at $71.47 per barrel, up $1.98 (2.85%) from the previous trading day, and Brent crude, the global oil price benchmark, rose $1.98 (2.7%) to close at $75.08 per barrel.