U.S. Stocks Cap Monthly Gain as Dollar Strengthens: Markets Wrap

Updated on
  • S&P 500 rises 2.2% in October, Dow jumps almost 1,000 points
  • Treasuries fall, dollar gains as Fed decision due Wednesday

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U.S. stocks capped the best month since February and the dollar strengthened as investors assessed the prospects for tax cuts and the next Federal Reserve chairman. The euro slipped as data showed inflation unexpectedly slowed in the region.

The S&P 500 Index finished October with a gain of more than 2 percent and the Dow Jones Industrial Average added nearly 1,000 points in the period, spurred by strong economic data, rising expectations for tax cuts and robust corporate earnings. Small caps led advances Tuesday to erase a loss for October. Facebook Inc. was little changed as its executives testified before Congress. 

The 10-year Treasury yield held near 2.37 percent, four basis points higher than when it ended September. The greenback gained versus major peers to cap a second straight monthly advance. Oil headed for its first back-to-back monthly gains of the year. Gold fell for a second month.

Tuesday’s trading undid most of Monday’s moves as investors stare down a torrent of decisions with the potential to move markets. President Donald Trump signaled he’ll name a new Fed chair Thursday, while Wednesday brings the central bank’s rate decision and some specifics on tax plans. Markets remain on edge after the first indictments from Robert Mueller, which may may pose a danger to tax cuts. The news flow has overshadowed a robust corporate earnings season and fresh data showing the U.S. economy on firm footing.
In Europe, Spanish equities outperformed Tuesday as the government in Madrid won the power struggle against Catalan separatists. Bonds in the region edged lower after data showed the economy appeared to be strengthening. A drop in China’s factory gauge sparked some caution in Asia, with equity benchmarks mixed. Japanese stocks ended the day slightly lower after the Bank of Japan maintained its key policy rate.

The European data came amid mixed signals about the global economy. China’s official factory gauge fell this month, though the country’s economy continues to defy predictions of a sharper slowdown. The euro-area’s unemployment rate inched lower in September as the economy expanded for an 18th consecutive quarter, but consumer inflation unexpectedly slowed in October, complicating the European Central Bank’s task as it considers tightening policy.

Michael Zezas, chief U.S. public policy strategist at Morgan Stanley, discusses the Russia probe.

Daybreak: Americas.’ (Source: Bloomberg)

Terminal users can read more in our Markets Live blog.

Here are some key upcoming events this week:

  • The U.S. central bank’s next rate decision is on Wednesday, with economists expecting policy makers to hold rates for now and to increase them at the December meeting.
  • The U.S. October payroll report comes out Friday.
  • Trump starts an 11-day trip to Asia, his first as president, on Friday. Trade and security issues -- particularly North Korea -- will probably be in focus.
  • A probable Bank of England rate hike on Thursday will be the first in a decade.
  • The slew of earnings releases will culminate with Apple Inc. results.
  • Germany’s markets are closed for a public holiday.

And these are the main moves in markets:

Stocks

  • The S&P 500 rose 0.1 percent to 2,575.31 at 4 p.m. in New York. It added 2.2 percent in the month, the most since February.
  • The Russell 2000 Index jumped 0.9 percent, rebounding from a rout Monday and headed for a 0.6 percent gain in October.
  • The Stoxx Europe 600 Index increased 0.3 percent to the highest in more than five months. It rose 1.8 percent in the month.
  • Spain’s IBEX Index gained 0.7 percent to the highest since Aug. 16.

Currencies

  • The Bloomberg Dollar Spot Index increased 0.1 percent. 
  • The euro dipped 0.1 percent to $1.1634. 
  • The British pound rose less than 0.05 percent to $1.3212.

Bonds

  • The yield on 10-year Treasuries climbed less than one basis point to 2.37 percent. 
  • Germany’s 10-year yield fell less than one basis point to 0.36 percent, the lowest in two weeks.
  • Britain’s 10-year yield dipped one basis point to 1.335 percent, the lowest in more than a week.

Commodities

  • West Texas Intermediate crude rose 0.4 percent to $54.38 a barrel, the highest in more than six months. 
  • Gold futures decreased 0.5 percent to $1,271.50 an ounce.

Asia

  • Japan’s Topix index declined 0.3 percent at the close of trading in Tokyo, while the Nikkei 225 Stock Average was flat. SoftBank declined 4.6 percent. 
  • Australia’s S&P/ASX 200 Index fell 0.2 percent. 
  • The Kospi in Seoul climbed 0.9 percent. 
  • Hong Kong’s Hang Seng Index was steady while the Shanghai Composite Index was up 0.1 percent.
  • The Japanese yen declined 0.2 percent to 113.36 per dollar.
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