[New York Stock Market] All Fall Ahead of FOMC... Dow Up 14% in October

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices of the U.S. New York stock market all fell on October 31 (local time), the last trading day of October, as they awaited the Federal Reserve's Federal Open Market Committee (FOMC) regular meeting. However, the Dow Jones Industrial Average, centered on blue-chip stocks, recorded its best month since 1976 despite the decline on the day, showing a rally throughout October.

On this day at the New York Stock Exchange (NYSE), the Dow closed at 32,732.95, down 128.85 points (0.39%) from the previous session. The large-cap S&P 500 index fell 29.08 points (0.75%) to 3,871.98, and the tech-heavy Nasdaq index dropped 114.31 points (1.03%) to 10,988.15. All three major indices showed strong rebounds throughout October. The Dow rose 13.95% over the month, marking the highest increase since January 1976. The S&P 500 and Nasdaq also rose 8% and 3.9%, respectively, over the month.

The decline on this day is interpreted as caution ahead of the FOMC regular meeting scheduled for November 1-2. Ryan Detrick, Chief Market Strategist at Carson Group, said, "The market is taking a breather," adding, "This is considering the important Fed meeting (FOMC) and interest rate decisions."

By sector, interest rate-sensitive tech stocks generally showed weakness. Meta closed down 6.09% from the previous session. Apple fell 1.54%, Google Alphabet dropped 1.85%, and Microsoft declined 1.59%. Semiconductor stocks such as Nvidia (-2.44%), AMD (-3.14%), and Intel (-2.20%) also slumped.

Casino company Wynn Resorts surged 9.61% on news that billionaire Tilman Fertitta, owner of the Houston Rockets, purchased a 6.1% stake. Newell Brands fell more than 8% after major investment banks including Jefferies downgraded their investment ratings following last week's earnings announcement. Autonomous driving startup TuSimple plummeted over 45% after its CEO was dismissed. The FBI and the Securities and Exchange Commission (SEC) have launched investigations after detecting allegations that TuSimple transferred technology to a Chinese company without regulatory approval.

Investors showed a pause as they awaited the FOMC. The Fed is expected to implement a giant step of a 0.75 percentage point rate hike at the November FOMC, which would raise the U.S. benchmark interest rate to 3.75%-4.00%. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market reflects over an 88% probability of a giant step in November. The probability of an additional giant step in December is 50.6%, while the chance of a big step (0.5 percentage point hike) is 44.3%.

Economic media CNBC reported that many Wall Street investors are looking for signals in the FOMC statement or Fed Chair Jerome Powell's press conference that the Fed might pause or reduce the pace of rate hikes soon. Quincy Crosby of LPL Financial said, "Wednesday's (the 2nd, when the FOMC statement and Powell's press conference take place) message will play a decisive role in future market expectations," adding, "Powell will need to carefully craft his responses during the press conference."

If no signals emerge indicating a reduction in the rate hike pace, the market could slide due to disappointment. Goldman Sachs raised its forecast for the Fed's terminal rate in March next year from 4.75% to 5%. Steven Ines, Managing Partner at SPI Asset Management, said, "It depends on this week's FOMC press conference," and predicted, "If there are clues toward slowing the pace of hikes, the S&P 500 could rise to 4,100 by the end of the week."

The earnings season continues. This week, Uber, Pfizer, and AMD will release their earnings. October showed a somewhat mixed pattern. Particularly, earnings disappointments centered on big tech companies like Meta and Amazon led to last week's sharp market decline. Even companies that reported earnings exceeding expectations are evaluated as having profit growth rates below previous years. According to FactSet, more than half of S&P 500 companies have reported their third-quarter earnings, with their net profit growth rate at only 2.2%. This is the lowest since the third quarter of 2020 (-5.7%), when the pandemic impact continued.

Ahead of the FOMC, Treasury yields rose. On this day in the bond market, the 10-year U.S. Treasury yield rose to around 4.05%, and the 2-year yield, sensitive to monetary policy, rose to about 4.49%. The inversion of the yield curve, where short-term yields such as the 3-month (4.08%) and 2-year yields exceed the long-term 10-year yield, continues. This is generally considered a sign of an impending recession.

The dollar showed strength. The Dollar Index, which measures the value of the dollar against six major currencies, rose more than 0.7% to around 111.

Oil prices weakened due to weak economic indicators from China. On the New York Mercantile Exchange, December West Texas Intermediate (WTI) crude oil closed at $86.53 per barrel, down $1.37 (1.56%) from the previous session. This is interpreted as a negative impact on future economic outlooks following China's October manufacturing PMI, non-manufacturing PMI, and composite PMI all falling below the baseline of 50, indicating contraction.

This content was produced with the assistance of AI translation services.