NEW YORK: Wall Street rallied on Monday (Oct 30), kicking off what promises to be a hectic week that includes a heavy earnings docket, economic data and the Federal Reserve’s (Fed) two-day monetary policy meeting.
All three major US stock indices closed up more than 1%, bouncing back from the previous week's sell-off. Interest rate sensitive megacap stocks, led by Microsoft Corp, Amazon.com, and Apple Inc provided the most upside muscle.
The Dow Jones Industrial Average rose 511.37 points, or 1.58%, to 32,928.96, the S&P 500 gained 49.45 points, or 1.20%, to 4,166.82 and the Nasdaq Composite added 146.47 points, or 1.16%, to 12,789.48.
“Today is an earnings rebound,” said Oliver Pursche, senior vice-president at Wealthspire Advisors, in New York. “The market got oversold, and the reality is that earnings have been pretty good, the US economy continues to chug along, and is likely to do so in the fourth quarter and into the first part of next year.”
Third-quarter earnings season, firing on all cylinders, has reached its halfway point, with 251 of the companies in the S&P 500 having reported. Of those, 78% have beaten Wall Street estimates, according to LSEG.
Analysts now expect, on aggregate, annual third quarter S&P 500 earnings growth of 4.3%, a marked improvement over the 1.6% year-on-year growth seen at the beginning of October.
Investors have shown “less pessimism”, Pursche added. “First- and second-quarter calls had a more negative tone. There was anxiety over interest rates, Fed policy, the recession that never came.”
In the coming week, Caterpillar Inc, Apple Inc, Pfizer Inc and Starbucks Corp are among the higher profile companies expected to post results.
On Tuesday, the Federal Open Markets Committee is expected to convene for a two-day monetary policy meeting, which is expected to culminate in a decision to let the Fed funds target rate stand at 5.25%-5.50%.
Investors will scrutinise the accompanying statement and Fed chair Jerome Powell's subsequent question-and-answer session for clues regarding the central bank’s path forward with rates.
“The Fed wants to see the cumulative effects of their rate hikes on the economy but they’ve also said they’re prepared to overshoot in an abundance of caution, as long as inflation is above 3%,” Pursche said.
The Bank of England and the Bank of Japan would also be announcing rate decisions this week, with the latter set to consider a further adjustment to its yield curve control framework, according to a Nikkei report.
Closely watched economic data is on tap this week, culminating in the US Labour Department's October employment report due on Friday.
McDonald’s reported better-than-expected quarterly results, driven by demand for its more affordable food as consumers contend with ongoing inflation pressures. Its shares gained
1.7%.
Western Digital Corp jumped 7.3% after the company disclosed plans to separate itself into two independent public companies. – Reuters