US markets endured a volatile day on Monday, with the Dow Jones Industrial Average closing down 257 points as investors anxiously awaited the outcome of the US presidential election and a potential rate cut from the Federal Reserve later this week. The S&P 500 and Nasdaq also faced declines, reflecting the unease surrounding the election’s uncertain outcome and its implications for economic policy. Trading was choppy, with the Dow at one point dropping over 400 points, highlighting the concern among investors as polls indicated a tight race between former President Donald Trump and Vice President Kamala Harris. 

Key Takeaways:

  • Dow Falls Over 200 Points: The Dow Jones Industrial Average slumped 257.59 points, or 0.61%, to close at 41,794.60, as investors braced for the US presidential election and a potential Federal Reserve rate cut. At one point, the Dow fell over 400 points, reflecting heightened uncertainty in the market.
  • S&P 500 and Nasdaq Decline: The S&P 500 dipped 0.28%, closing at 5,712.69, while the Nasdaq Composite dropped 0.33% to settle at 18,179.98. Both indices experienced choppy trading as markets weighed election uncertainties and Federal Reserve actions.
  • European Markets Close Lower: The pan-European Stoxx 600 closed down 0.3%, with technology stocks falling 1.1%. The DAX dropped 107 points, or 0.56%, and France’s CAC 40 decreased by 37 points, or 0.50%. The FTSE 100 jumped the trend slightly, gaining 7.09 points, or 0.09%, to close at 8,184.24. Banks led gains by sector, trading up 0.7%, while technology stocks were among the weakest performers. Shares of Burberry climbed 4.8% following reports of a potential bid from Moncler, lifting the luxury retail segment.
  • Asia-Pacific Markets Rise: In contrast to US and European markets, Asia-Pacific markets saw gains. South Korea’s Kospi rose 1.83% to 2,588.97, snapping a three-day losing streak, while the Kosdaq gained 3.43%. The S&P/ASX 200 in Australia closed up 0.56% at 8,164.6, as the Reserve Bank of Australia was expected to hold interest rates steady. Mainland China’s CSI 300 rose 1.41% to 3,944.76, supported by optimism about potential fiscal support from the Chinese parliament meeting. The Hang Seng index climbed 0.27%, and the Taiwan Weighted Index gained 0.81% to close at 22,965.39.
  • Oil Prices Surge Over 3%: Brent crude futures rose $2.24 per barrel, or 3.06%, to close at $75.34, while West Texas Intermediate crude gained $2.26 per barrel, or 3.24%, settling at $71.75. OPEC announced it would delay its output hike of 180,000 barrels per day, extending production cuts until December due to weak demand. The delay comes amid falling prices and weak global demand, with OPEC aiming to maintain stability in the oil market.
  • Treasury Yields Fall: US Treasury yields declined, with the 10-year yield falling six basis points to 4.299% and the 2-year yield dipping three basis points to 4.172%. Investors are positioning cautiously ahead of the US election and Federal Reserve’s rate decision. The yield on the 10-year Treasury has been testing downtrend resistance at 4.35%, and analysts expect yields to decline below 4% by year-end.
  • US Factory Orders Fall: US factory orders fell for a second consecutive month in September, dropping 0.5% after a downwardly revised 0.8% decrease in August, according to the Commerce Department’s Census Bureau. This decline reflects a slowdown in business spending, with non-defence capital goods excluding aircraft showing a 4.4% decrease. Shipments of these goods also fell by 3.4%, indicating weaker business investment in the third quarter. Orders for non-defence capital goods excluding aircraft, a key indicator of business investment, increased by 0.7% in September, providing a glimmer of optimism despite the overall decline in factory orders. Shipments of core capital goods, which go into the calculation of business investment in the GDP report, fell 0.1%, suggesting a potential pullback in business spending on equipment.

FX Today:

  • EUR/USD Slides as Market Awaits Election Outcome: EUR/USD closed at 1.0874, slipping by 0.13% as investors positioned cautiously ahead of the US presidential election. The pair briefly tested the 100-period SMA at 1.0884 but encountered selling pressure, pushing it back below the 1.0880 mark. The 50-period SMA at 1.0833 now provides immediate support, with the broader trend remaining bearish as long as the pair remains below the 100-period SMA. Any break below 1.0830 could see EUR/USD testing the 1.0800 level, while upside momentum would require a decisive close above the 1.0884 resistance.
  • GBP/USD Faces Resistance, Bearish Sentiment Continues: GBP/USD ended the day at 1.2954, down by 0.02%, as it struggled to break above key moving averages. The 100-period SMA at 1.2998 and the 50-period SMA at 1.2965 acted as significant resistance levels, keeping the pair under pressure. Immediate support lies at 1.2900, with a potential break lower targeting 1.2850. The broader outlook remains bearish, with the 200-period SMA at 1.3119 indicating strong overhead resistance.
  • USD/CHF Mixed Amid Market Uncertainty: USD/CHF closed at 0.8640, up 0.13% for the day. The pair tested resistance at the 100-period SMA at 0.8645 but was unable to maintain gains above this level. The 50-period SMA at 0.8611 provided support, while the 200-period SMA at 0.8648 added resistance, leaving the pair in a consolidation phase. A break above the 200-period SMA could signal further gains, while failure to do so may see the pair retest the 0.8600 level.
  • AUD/USD Down as Resistance Holds: AUD/USD closed at 0.6585, marking a slight loss of 0.11%. The pair attempted to rise but faced strong resistance at the 50-period SMA at 0.6592. The 100-period SMA at 0.6645 remains a key barrier for any potential upside, while immediate support lies at 0.6550. A failure to hold this support could see the pair drop further towards 0.6500, in line with the prevailing bearish trend.
  • Gold Struggles to Break Resistance: Gold prices closed slightly lower at $2,737.5, down by 0.03% as it faced resistance at the 50-period SMA at $2,748. Despite initial attempts to push higher, sellers emerged near this level, signalling waning bullish momentum. The 100-period SMA at $2,720 and the 200-period SMA at $2,678 provide underlying support. A break below $2,720 could lead to a test of the $2,700 psychological level, while a move above $2,750 would be needed to spark renewed bullish interest.

Market Movers:

  • Nvidia Gains on Dow Inclusion: Nvidia shares rose 0.5% after it was announced that the chipmaker would replace Intel in the Dow Jones Industrial Average, effective at the end of the week. Nvidia’s inclusion helped provide some stability to the tech-heavy indices, while Intel shares dropped more than 2.9% on the news of being replaced.
  • Sherwin-Williams Climbs as Dow Member: Sherwin-Williams saw a significant gain of 4.6% after it was announced that it would replace Dow Inc. in the Dow Jones Industrial Average. The inclusion of the paint manufacturer pushed its stock higher, while Dow Inc. shares fell by 2.1% as it was removed from the index.
  • Berkshire Hathaway Drops on Weak Earnings: Berkshire Hathaway shares fell nearly 2% after the company reported third-quarter operating earnings of $10.1 billion, about 6% lower compared to the same period last year. The earnings also came in slightly below analyst estimates, contributing to the stock’s decline.
  • Talen Energy Falls After Rejected Nuclear Expansion: Talen Energy dropped more than 2% after federal regulators rejected a request to increase power output at the Susquehanna nuclear plant. The decision impacted investor sentiment, leading to a decline in the independent power producer’s stock.
  • Constellation Energy Plummets on Nuclear Deal Rejection: Constellation Energy saw its shares plunge 12.5% following news that federal regulators rejected Talen Energy’s nuclear expansion request. The rejection of the expansion also negatively affected investor expectations of Constellation’s potential deals.
  • Peloton Jumps After Upgrade: Peloton shares surged 3.6% after Bank of America upgraded the exercise equipment company to “buy” from “underperform.” The bank cited optimism about earnings growth under the new CEO, Peter Stern, as the reason for the upgrade.
  • Yum China Holdings Surges on Strong Earnings: Yum China Holdings rallied over 7% after reporting a top- and bottom-line beat in its third-quarter earnings. Revenue grew 5% year-over-year to reach an all-time quarterly high of $3.07 billion, which exceeded analyst expectations.
  • Marriott International Falls on Disappointing Guidance: Marriott International shares declined by 1.6% after the company reported weaker-than-expected third-quarter earnings and forward guidance. Marriott posted adjusted earnings of $2.26 per share, missing analyst expectations of $2.31, while revenue of $6.26 billion also fell short of the $6.27 billion estimate.
  • New York Times Drops on Fewer Digital Subscribers: The New York Times saw its stock decline 7.7% after the company added fewer-than-expected digital subscribers in the third quarter. Despite strong digital advertising sales, the disappointing subscription numbers led to a sell-off in the stock.

As investors brace for a pivotal week with the US presidential election and Federal Reserve’s rate decision looming, market sentiment remains fragile. The Dow, S&P 500, and Nasdaq all faced declines, while European and Asian markets experienced mixed results. Oil prices surged, and Treasury yields fell, reflecting cautious positioning across financial markets. Major sectors showed varying responses, with technology stocks underperforming, while the energy and luxury retail segments saw gains. Market participants are likely to remain on edge until more clarity emerges on the election outcome and future monetary policy direction, which could determine the market’s next major moves.