Dow is on track to clinch best October ever as investors await Fed meeting

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The Dow Jones Industrial Average finished with its best October performance ever on Monday, despite falling along with the S&P 500 and Nasdaq Composite and pulling back from a two-month high, as traders looked toward the Federal Reserve’s midweek decision on interest rates.

How stocks traded

  • The Dow Jones Industrial Average finished down by 128.85 points, or 0.4%, at 32,732.95.
  • The S&P 500 ended lower by 29.08 points, or 0.8%, at 3,871.98.
  • The Nasdaq Composite closed down by 114.31 points, or 1%, at 10,988.15.

October’s gain in the Dow industrials was 14%, surpassing the 10.65% threshold needed to secure the blue-chip gauge’s strongest October on record, according to Dow Jones Market Data. In addition, the Dow’s October showing produced the gauge’s largest monthly percentage gain since January 1976.

Stock Market Today: Live coverage of Monday’s market action

What drove markets

Investors turned cautious ahead of the Federal Reserve’s monetary-policy meeting, which concludes on Wednesday, and sold off equities following the stock-market’s recent gains.

Monday’s moves in the stock market amounted to a “mild profit-taking pullback and wait-and-see mode” by investors, said Art Hogan, the Boston-based chief market strategist at B. Riley Wealth.

In particular, investors want to see whether Fed Chairman Jerome Powell concedes to expectations that the Fed might be looking to slow the pace of rate increases in December, or pushes back on that narrative with a more hawkish outlook which would “tip over the apple cart,” Hogan said via phone.

Read: What Fed Chair Powell can say to keep the rally in stocks going — or kill it

For now, fed-funds futures traders are pricing in a slightly higher chance of a 75-basis-point hike than a 50-basis-point move in December, after policy makers deliver a widely expected 75-basis-point hike on Wednesday.

Investors are also looking ahead to Friday’s nonfarm payroll report for October, as well as next week’s midterm elections — each of which could be market-moving events, Hogan said.

Last week, the S&P 500 gained 4% and Dow industrials advanced 5.7% as investors brushed off a hot PCE inflation report for September and China’s renewed Covid-19 lockdowns. Although disappointing announcements from market stalwarts like Alphabet  Amazon and Meta Platforms saw megacap tech stocks get slammed, a Friday bounce helped the Nasdaq Composite to a weekly gain.

“Last week was obviously crazy,” said Brian Overby, senior markets strategist at Ally Invest, in a phone interview.

But drilling down into earnings results showed that the consumer remains resilient, he said. Continued strength in the job market that translates into solid holiday spending could help set the stage for a Santa Claus rally heading into year’s end, he said.

John Butters, senior earnings analyst at FactSet, noted that with just over half of S&P 500 companies having reported third-quarter 2022 results, the blended earnings growth rate for the index so far was 2.2%, the lowest such rate since the -5.7% seen in the third quarter of 2020.

Earnings Watch: Wall Street is being nicer on earnings as vaccine makers, fintech reports near

Still, the market reaction suggests that though earnings may not be great relative to previous quarters, they’ve been better than many investors feared, with 71% of the reporting companies delivering a positive earnings per share surprise and 68% a positive revenue surprise.

Meanwhile, market sentiment was dented by data indicating China’s factory, construction and services activity contracted in October.

On Monday, President Joe Biden will speak about major oil companies’ record-setting profits, “even as they refuse to help lower prices at the pump for the American people,” the White House announced. Biden’s remarks, scheduled for 4:30 p.m. Eastern, come just over a week before U.S. midterm elections in which energy prices and inflation are playing a critical role.  

Energy stocks have left the S&P 500’s other 10 sectors in the dust in 2022, with a gain of 63.2% year to date versus the large-cap benchmark’s 18.8% fall. The sector-tracking Energy Select Sector SPDR ETF was up 0.8% on the day and finished the month with a double-digit monthly gain.

Wheat futures jumped 5.9% to $8.78 per bushel after Russia withdrew from the U.N. deal allowing safe passage of grain from Ukraine’s southern ports.

Companies in focus

  • Emerson Electric Co. shares finished down by 0.9% even after the automation technology and software company confirmed an agreement to sell a majority stake in its climate technologies business to Blackstone Inc. in a deal that values the business at $14 billion.
  • Actinium Pharmaceuticals Inc. shares closed up by 39.2% after the company met the primary endpoint in a Phase 3 clinical trial for its investigational treatment for relapsed or refractory acute myeloid leukemia.
  • Cannabis stocks rallied after Senate Majority Leader Chuck Schumer said Congress is “very close” to passing a cannabis banking and expungements measure. Shares of Canopy Growth Corp.  finished up by 18.4%. Ascend Wellness Holdings Inc.  ended up by 4.5% and Tilray Brands Inc. finished 12.1% higher.

— Jamie Chisholm contributed to this article.

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