Title: U.S. Stocks Hold Steady as Investors Await Federal Reserve Guidance
Date: November 6, 2023
Author: Chuck Mikolajczak
U.S. stocks remained relatively unchanged on Monday as investors eagerly awaited guidance from Federal Reserve policymakers later in the week on the central bank’s future policy decisions. Additionally, the market experienced pressure as a substantial amount of bond supply was set to enter the market.
Last week, equities saw their largest weekly percentage gain in approximately a year after a weaker-than-expected U.S. payrolls report suggested that the Fed might stop raising interest rates and instead consider future rate cuts. As a result, Treasury yields declined.
Currently, market expectations indicate a 90.4% chance that the Fed will maintain interest rates during its December meeting, a slight decrease from Friday’s 95.2%. Nonetheless, this percentage remains higher than the 74.4% from the previous week. Looking ahead to the May 2024 meeting, expectations for a rate cut of at least 25 basis points have surpassed a 50% likelihood, according to CME’s FedWatch Tool.
Investors are eagerly awaiting further clarity on the Federal Reserve’s intentions, which will be provided by notable officials such as Chair Jerome Powell, New York Fed Chief John Williams, and Dallas Fed President Lorie Logan later in the week. Various speeches and statements from these policymakers will shed light on the direction and trajectory of monetary policy.
Stephen Massocca, Senior Vice President at Wedbush Securities in San Francisco, stated, “Unless something in the economic data prompts it, you won’t see them change their tone.” Massocca believes that the Fed will maintain its current stance unless significant economic developments occur.
The S&P 500 witnessed a significant 5.85% increase last week, and the Nasdaq experienced a 6.61% surge, marking their largest weekly gains since November 2022. However, this buying force was not sustained on Monday, causing some stocks to decline and bond yields to rise.
Meanwhile, the benchmark ten-year Treasury note yield, which reached a five-week low on Friday, reversed course and reached a high of 4.662% on Monday. The reversal preceded this week’s Treasury auction of approximately $112 billion in three-year and ten-year notes and 30-year bonds.
This week’s economic data calendar is relatively light, with Thursday’s weekly jobless claims numbers and Friday’s consumer sentiment report from the University of Michigan being the notable highlights.
Major companies reporting earnings this week include Walt Disney, Instacart, and Biogen. Among the S&P 500 companies that have reported profits for the third quarter, 81.6% have surpassed analyst estimates, according to data from LSEG.
As of 02:47 p.m., the Dow Jones Industrial Average rose 5.68 points (0.02%) to 34,068.72, the S&P 500 gained 1.05 points (0.02%) at 4,359.39, and the Nasdaq Composite advanced 10.91 points (0.09%) to 13,489.87.
In other news, Dish Network plunged 34.1% after missing third-quarter revenue estimates, leading to CEO Erik Carlson stepping down. Additionally, Bumble fell 4.9% as founder Whitney Wolfe Herd announced her resignation as chief executive.
Declining stocks on the NYSE outnumbered advancers by a ratio of 2.4-to-1, while on the Nasdaq, declining stocks surpassed advancers by a ratio of 1.7-to-1.
The S&P 500 recorded nine new 52-week highs, with no new lows, while the Nasdaq registered 43 new highs and 99 new lows.
Editing by Richard Chang.
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