Wall St closes higher on eve of Fed decision; investors assess earnings

All three indexes started the day in the red but by 1 pm were in the black and all ended the session up as investors picked up bargains from last week’s dry spell.  The move back into positive territory seems to indicate the market believes the Fed will hold off on more hikes this year amidst a batch of mixed earnings and the uncertainty of the two wars.  But as today’s expert put a more positive spin on things, “the recent sell-off brings us back to fairly valued from over-valued levels.” This is the third consecutive monthly loss for all indexes with the Dow down 1.4%, the S&P 2.2, the Nasdaq 2.8%.  There are now 279 Q3 reports and 78% have beaten forecasts. Earnings forecast is now 4.9%, quite a jump from the 1.6 a month ago.  Volume came in at 10.6 billion.  

Wall St closes higher on eve of Fed decision;

investors assess earnings

By Sinéad Carew and Amruta Khandekar

Tue October 31, 2023 4:08 PM

DJ: 32,928.96  +511.37       NAS: 12,789.48  +146.47       S&P: 4,166.82  +49.45     10/30

DJ: 33,052.87  +123.91       NAS: 12,851.24  +61.75         S&P: 4,193.80  +26.98     10/31

Oct 31 (Reuters) - Wall Street's main indexes closed higher on Tuesday as investors looked ahead of the Federal Reserve's monetary policy update while they digested a mixed batch of earnings reports.  The Fed kicked off a two-day monetary policy meeting at which the central bank is widely expected to hold interest rates steady. Investors will monitor Fed Chair Jerome Powell's comments for clues about its future plans.  Investors were also reacting to disappointing earnings reports and showed jitters over geopolitics.

Shares in heavy-machinery maker Caterpillar (CAT.N) fell as signs of slowing machinery demand overshadowed a quarterly earnings beat. And drugmaker Amgen's (AMGN.O) stock lost ground as third-quarter sales of some high-profile medicines were below expectations.  But with 10-year Treasury yields up just slightly, some investors took the opportunity to look for bargains after recent weakness in stocks, said Sameer Samana, Senior Global Market Strategist at Wells Fargo Investment Institute.  "All roads right now lead back to long-term rates which impact equities," said Samana, adding that in stocks some investors may be encouraged by the idea that, "the recent sell-off brings us back to fairly valued from over-valued levels." 

However the strategist was wary of upcoming events that could be huge catalysts for bonds and in turn equities. Along with the Fed's policy update, he will also watch the U.S. Treasury Department's announcement about its financing plans.  Analysts have said it is likely to boost the size of auctions for bills, notes, and bonds in the fourth quarter to fund a widening budget deficit. This would cause rates to rise further and hurt stocks, according to Wells Fargo's Samana.  And on Friday, equity investors will also be monitoring the October U.S. jobs report and the Treasury market's reaction. 

The Dow Jones Industrial Average (.DJI) rose 123.91 points, or 0.38%, to 33,052.87, the S&P 500 (.SPX) gained 26.98 points, or 0.65%, to 4,193.8 and the Nasdaq Composite (.IXIC) added 61.76 points, or 0.48%, to 12,851.24.  All 11 of the S&P 500's major industry sectors advanced, with real estate (.SPLRCR) up 2% and leading gains, while the biggest laggard, communication services (.SPLRCL), gained 0.2%. 

All three of Wall Street's major averages registered their third monthly loss in a row.  For the S&P 500, down 2.2% for the month, and the Dow, off 1.4%, it was the longest monthly losing streak since the pandemic roiled markets in early 2020.  Nasdaq which lost 2.8% in October, last fell for three straight months in the period ending June 2022.

"Today's move back into positive territory is on the growing consensus the Fed is more likely to hold off on any more rate hikes this year," said Greg Bassuk, chief executive of AXS Investments in New York.  Bassuk also pointed to mixed earnings reports and companies "messaging concerns about upcoming quarters with energy prices rising and increasing uncertainty" around wars in Israel and Ukraine that are "showing no end in sight."  Earlier, data showing a solid increase in U.S. labor costs in the third quarter prompted some concerns the Fed could keep interest rates higher for longer.

Of the 279 companies in the S&P 500 that have reported earnings to date, over 78% have beaten analyst estimates, per LSEG data. Analyst expect earnings growth of 4.9% for S&P 500 companies in the third quarter.

Nvidia (NVDA.O) shares fell after a report said the latest U.S. curbs could force the chip designer to cancel billions of dollars of orders to China.  Pinterest (PINS.N) shares rallied after the image-sharing platform beat third-quarter revenue and profit estimates.  VF Corp (VFC.N) shares sold off after the Vans sneaker maker withdrew its annual forecast. Arista Networks (ANET.N) stock rallied after it gave an upbeat fourth-quarter revenue outlook.  Sarepta Therapeutics (SRPT.O) shares plummeted on the failure of its muscle disorder gene therapy in a late-stage trial. Shares of Sarepta's client, Catalent (CTLT.N), also fell. 

Advancing issues outnumbered declining ones on the NYSE by a 2.31-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favored advancers.  The S&P 500 posted 1 new 52-week highs and 15 new lows; the Nasdaq Composite recorded 16 new highs and 262 new lows.

On U.S. exchanges 10.67 billion shares changed hands compared with the 10.64 billion average for the last 20 sessions.