12.05pm: Dow Jones drops 200 points
US indices saw the Dow Jones fall 200 points midday as American job openings data for September showed a resilient labour market, and traders hope for a dovish turn by the US Federal Reserve.
At midday, the S&P 500 was down by 0.4% at 3,856, the Nasdaq Composite was down by 0.6% at 10,922 while the Dow Jones was down by 0.4% to 32,595 points.
Fawad Razaqzada, market analyst with StoneX, said the Dow is now up against a major resistance: the 200-day moving average.
“With the FOMC meeting upon us, traders who bought the Dow or stocks in the last month are apparently taking profit, which helps explain the index’s struggles over the past couple of days,” Razaqzada wrote in a report.
“But there’s always the potential that we could see a complete reversal around this moving average, like the previous occasions earlier this year. I can list you a whole list of arguments why stocks could struggle to make further headway but will leave that for another day. If you are bullish or long, take extra care here. If you are bearish then there might be tactical shorting opportunities to take advantage of again, especially if the Fed delivers a hawkish surprise on Wednesday,” Razaqzada wrote.
The major movers at midday included medical tech company Ambiomed, hitting a new 52-week high, up over 50% after beating 2Q earnings estimates. Trip Group was up by over 7%, and IDEXX Laboratories rose by 6.7%.
On the downside, biologics technology company Catalent hit a new 52-week low, down by 25.8% on a 1Q earnings miss. Zebra Technologies was down over 15%, Sealed Air was down 9.6% and Ecolab was down by 9%.
9.40am: Hope Fed’s aggressive rate hikes are coming to an end
US stocks opened higher on optimism regarding the outcome of the Fed’s November meeting on Wednesday, with investors hoping for dovish pivot by the central bank.
Just after the market opened, the Dow Jones Industrial Average had added 240 points or 0.7% at 32,973 points, the S&P 500 was up 37 points or 1% at 3,910 points, and the Nasdaq Composite had gained 144 points or 1.3% at 11,133 points.
Forex.com market analyst Joshua Warner noted that stocks had found support on hopes the central bank could adopt a less hawkish approach to monetary policy after their November meeting.
“Strategists at JPMorgan said there is hope that aggressive rate hikes are coming to an end and that they will start to rise at a slower rate after the November meeting before peaking in the first quarter of 2023,” Warner said.
“Markets are also finding some support from speculation that China could look to remove Covid-19 restrictions and reopen the economy once again, with stocks like Alibaba, Baidu, Bilibili and JD.com all trading 5.9% to 9.3% higher on their American exchanges today.”
In terms of other major movers, Uber jumped 13.6% at the open after the ride-sharing company posted mixed 3Q results, including a revenue beat due a surge in bookings.
Ahead of reporting its results after the closing bell today, Airbnb shares rose 3.8%, with the accommodation platform expected to report increased revenue and improved adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).
“It is important to remember that the business remains considerably larger than it did before the pandemic, although the ability to keep delivering the strong growth that investors have become accustomed to will become more difficult as markets brace for a recession in 2023,” Warner noted.
6.30am: All Hallows welcomed
US stocks are expected to push higher on Tuesday, starting the new month positively after a strong showing overall in October, although much will depend on another batch of earnings and underlying caution will remain ahead of Wednesday’s Federal Reserve policy meeting decision.
Futures for the Dow Jones Industrial Average were 0.7% higher in pre-market trading, while those for the S&P 500 were ahead 1.0%, and contracts for the Nasdaq-100 gained 1.2%. Wall Street stocks slipped on Monday but the major indexes still closed October with monthly gains.
The Federal Reserve Open Market Committee (FOMC) will gather today to start its latest two-day meeting to discuss how much more to raise US interest rates as the central bank tries to cool inflation, which remains near 40-year highs.
Craig Erlam, senior market analyst, UK & EMEA, OANDA commented: “While a 75 basis point hike looks locked in tomorrow, the messaging is what investors are interested in. Despite inflation remaining at eye-watering levels, there’s a growing belief that the central bank will signal a desire to ease off the brake over the following few meetings starting with a 50bps hike in December.
“It may come too late to avoid a recession but the Fed has been very clear from the start that while a soft landing is the desirable and attainable outcome, getting inflation under control is the primary focus. The question is whether the central bank believes its efforts will achieve that or if more needs to be done.”
“With the economy weakening, earnings not impressing and yield curves inverting – signaling an incoming recession – many now believe the risks of aggressive tightening are greater than a more gradual approach. The economy has a lot of tightening to absorb once rates likely hit the 3.75-4% range this week.
“A dovish signal could be an exciting moment for equity investors, one they’ve craved all year, but that doesn’t mean it’ll be plain sailing from here,” Erlam concluded.
On the corporate front, earnings are due Tuesday from a diverse set of companies including Airbnb, Uber, Pfizer, AMD and Devon Energy.