S&P500 climbs ahead of Fed rates decision

Stocks edged higher on Tuesday, as Wall Street closed out a tough month of trading.

Stocks posted their third-straight losing month. The Dow and the S&P 500 fell 1.4 per cent and 2.2 per cent, respectively. This marks the first three-month losing streak for both indexes since March 2020. The tech-heavy Nasdaq declined 2.8 per cent in October, also notching its third consecutive negative month.

October’s losses come amid a rapid rise in Treasury yields. This month, the benchmark 10-year U.S. Treasury yield breached the key 5 per cent level for the first time since 2007. Market participants attribute the rise to several factors, including concern the Federal Reserve will keep interest rates higher for longer.

The Fed is set to release its next decision on interest rates on Wednesday. Fed funds futures pricing suggests a roughly 99 per cent probability that the central bank will keep rates at current levels, according to the CME FedWatch Tool.

Historically speaking, November is a strong month for markets, and traders are hoping seasonal tailwinds will be supportive of a year-end rally. However, they expect a peak in bond yields will be needed before they see some relief in the equity market.

The Dow Jones Industrial Average rose 0.38 per cent. The S&P 500 climbed 0.65 per cent, while the Nasdaq Composite added 0.48 per cent.

Alphabet and Meta Platforms shares closed lower. Nvidia declined by about 1 per cent.

Tuesday also saw some key companies report results, with Caterpillar sliding more than 6 per cent after the construction equipment maker said its fourth-quarter revenue would only be “slightly” higher than the year-ago period. Caterpillar's Q3 results were better than expected thanks to strong pricing, but concerns arose about future pricing power and weakening demand, especially in China.

This mirrors broader industrial concerns of organic growth falling below estimates due to headwinds from higher rates, destocking, and uncertainty around Chinese demand.

JetBlue shares dropped more than 10 per cent after the airline’s third-quarter results missed expectations on the top and bottom lines.

Toyota is investing an additional $8 billion in its North Carolina battery plant, marking the largest foreign automaker investment in the US since 2022. This will bring Toyota's total investment in the plant to around $13.9 billion by 2030 and create 3,000 new jobs, making it a prominent hub for lithium-ion battery production in North America with over 5,000 jobs.

Turning to US sectors, all closed higher overnight. Real Estate and Financials were the leaders of the pack, whilst Communication Services recorded the fewest gains.

Global gold demand fell 6 per cent in Q3/2023 due to reduced central bank purchases and softer jewellery demand, according to the World Gold Council. However, central banks' year-to-date gold buying remained higher than in 2022, with China leading record levels of central bank purchases to hedge against inflation and reduce reliance on the US dollar.

Futures

Looking ahead the Australian landscape, the SPI futures are pointing to a 0.5 per cent gain.

Currency

One Australian dollar at 7:35 AM was buying 63.36 US cents.

Commodities

Gold fell 0.59 per cent. Silver lost 1.82 per cent. Copper shed 0.18 per cent. Oil dropped 1.19 per cent.

Figures around the globe

European markets closed mixed. London’s FTSE fell 0.08 per cent, Frankfurt gained 0.64 per cent, and Paris closed 0.89 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei added 0.53 per cent, Hong Kong’s Hang Seng fell 1.69 per cent while China’s Shanghai Composite closed 0.09 per cent lower.

The Australian share market closed 0.11 per cent higher at 6,781.

Ex-dividends

NB Global Corporate Income Trust (ASX:NBI) is paying 1.2179 cents unfranked
Partners Grp Global (ASX:PGG) is paying 1.35 cents unfranked
Rand Mining Ltd (ASX:RND) is paying 10 cents fully franked
Tribune Res Ltd (ASX:TBR) is paying 20 cents fully franked

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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