As we approach the start of today’s trading session, futures are indicating a positive open for the major U.S. indexes. In overnight trading, markets in Asia were mostly up. Meanwhile, stocks in Europe are showing modest gains. Elsewhere, oil futures have slipped about 0.7%, with West Texas Intermediate at around $91.20 a barrel.
Stocks moved higher Monday, marking two positive sessions in a row. The Dow Jones Industrial Average climbed 423 points, or 1.3%, the more widely diversified S&P 500 gained 36 points (1%), and the tech-heavy NASDAQ advanced 89 points (.9%). Most of the major market sectors were firmly in the green, led by communication services (+1.8%), energy (+1.7%), and technology shares (+1.6%). Among the few segments to lose ground, utilities took the biggest hit, falling 1.9%.
With the midterm elections under way today, investors are keen to find out which party will control Congress, and thus, if there will be any changes to policy and spending. The general consensus on Wall Street appears to be that if the Republicans take charge of both the House and Senate, it would be viewed as being favorable for stocks, which could spark a rally.
All eyes will then be on Thursday’s consumer price index (CPI) report for October. The current consensus is calling for a year-on-year increase of 7.9%, down slightly from 8.2% in September. If the reading is tamer than expected, it would boost investor confidence that the Fed may be closer to easing up on interest-rate increases and probably prompt a temporary upswing in stock prices.
However, even if the CPI report shows easing inflationary pressures, the central bank will want to see several more months of encouraging data before announcing any change to its current aggressive stance. So far, the Federal Reserve has increased the overnight lending rate by 0.75% at each of its last four meetings, and the chances are good that it will do the same when its Federal Open Market Committee gets together again in December.
This means more pain for the housing market, particularly new home construction, which has seen demand collapse in recent months. Notably, 30-year fixed-rate mortgages, which were around 3.1% when 2022 began, recently topped 7% for the first time in two decades, pricing a good number of potential buyers out of the market. – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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