Wall Street Opens Flat as Mid-Term Elections, Fed Meeting Draw Nearer

November 5, 2018

By Investors Hub

The major U.S. index futures are pointing to a roughly flat open on Monday, with stocks likely to show a lack of direction following the strong upward move seen last week.

Traders may be reluctant to make significant moves ahead of the highly anticipated midterm elections on U.S., which will decide control of both the House and Senate.

Democrats are seen as having a much better chance to claim a majority in the House than in the Senate, but controlling the lower chamber would still allow Democrats to hinder President Donald Trump?s agenda.

The Federal Reserve?s looming monetary policy announcement may also keep some traders on the sidelines, with the Fed due to announce is latest decision on Thursday.

While the Fed is widely expected to lead interest rates unchanged, traders will keep a close eye on the accompanying statement for clues about an expected rate hike in December.

After moving notably higher for a few sessions, stocks gave back some ground during the trading day on Friday. The major averages initially moved to the upside but pulled back into negative territory as the session progressed.

The major averages ended the day in the red but well off their lows of the session. The Dow fell 109.91 points or 0.4 percent to 25,270.83, the Nasdaq slumped 77.06 points or 1 percent to 7,356.99 and the S&P 500 slid 17.31 points or 0.6 percent to 2,723.06.

Despite the pullback on the day, the major averages moved significantly higher for the week. The Nasdaq surged up by 2.6 percent, while the Dow and the S&P 500 both jumped by 2.4 percent.

The downturn on Wall Street was led by Apple (AAPL), with the tech giant tumbling by 6.6 percent to a nearly three-month closing low.

The steep drop by Apple came after the company reported fiscal fourth quarter earnings and revenues that exceeded estimates but weaker than expected iPhone shipments.

Apple also forecast fiscal first quarter revenues of $89 to $93 billion, with the midpoint below the consensus estimate of $93 billion.

The pullback by the major averages also came as traders digested a closely watched Labor Department report showing stronger than expected job growth in the month of October.

The Labor Department said non-farm payroll employment surged up by 250,000 jobs in October after rising by a downwardly revised 118,000 jobs in September. Economists had expected an increase of about 190,000 jobs.

The report also said the unemployment rate in October was unchanged from the previous month at 3.7 percent, its lowest level since hitting 3.5 percent in December of 1969.

Average hourly employee earnings rose by $0.05 to $27.30 in October, reflecting a 3.1 percent increase compared to the same month a year ago.

The annual rate of hourly earnings growth accelerated from 2.8 percent in September, reaching the fastest pace since April of 2009.

The upbeat jobs data paints of positive picture for the U.S. economy but also led to renewed concerns about the outlook for interest rates.

“The U.S. jobs market remains incredibly strong and with wages starting to accelerate, domestic price pressures will increase,” said ING Chief International Economist James Knightley.

He added, “This will keep the Federal Reserve on its path of ‘gradual’ interest rate hikes with next week’s FOMC meeting set to signal a December move.”

Traders also kept an eye on conflicting reports about the likelihood of a trade deal between the U.S. and China ahead of meeting between President Donald Trump and Chinese President Xi Jinping later this month.

Natural gas stocks moved sharply lower over the course of the trading session, dragging the NYSE Arca Natural Gas Index down by 2.1 percent.

Within the natural gas sector, Newfield Exploration (NFX) pulled back sharply after jumping on Thursday after agreeing to be acquired by Encana (ECA) in an all-stock transaction valued at approximately $5.5 billion.

Significant weakness was also visible among semiconductor stocks, as reflected by the 1.5 percent slump by the Philadelphia Semiconductor Index. The index gave back ground after moving notably higher over the past few sessions.

Oil stocks also moved notably lower amid a continued decrease by the price of crude oil. Pharmaceutical and commercial real estate stocks also moved to the downside on the day, while telecom and steel stocks saw considerable strength.

Modupe Gbadeyanka

Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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