Overview
On Monday, U.S. stocks experienced a modest decline as investors prepared for a pivotal week, with the U.S. presidential election and the Federal Reserve’s upcoming policy announcement. The Dow Jones Industrial Average fell by 0.61%, while the S&P 500 and Nasdaq Composite also closed slightly lower, reflecting investor caution amid a volatile trading session. Polls indicating a narrow lead for Democratic candidate Kamala Harris over Republican candidate Donald Trump led to market uncertainty, affecting sectors sensitive to policy changes, including tech and energy.
In reaction to the latest election polling data from Iowa, the U.S. dollar, Treasury yields, and Bitcoin all saw declines as investors anticipated potential policy shifts. The 10-year Treasury yield dropped to 4.299% as it retreated from a recent high, benefiting small-cap stocks within the Russell 2000, which gained 0.4%. However, volatility remained high, with the CBOE Volatility Index (VIX)—Wall Street’s “Fear Gauge”—hovering close to a two-month high.
Energy stocks were among the day’s top performers, driven by a 1.87% increase in oil prices following OPEC+’s decision to delay its planned production hike. Meanwhile, Intel slipped 2.93% as Nvidia prepared to replace it in the Dow Jones Industrial Average, marking a notable shift in the semiconductor sector. The utilities sector also struggled, with Constellation Energy plummeting 12.46% following a regulatory decision affecting a key data center project.
- Dow Jones Industrial Average: Fell 0.61% to 41,794.60
- S&P 500: Lost 0.28% to 5,712.69
- Nasdaq Composite: Declined 0.33% to 18,179.98
Fear & Greed Index
Fear – With high stakes surrounding the election and the Fed’s upcoming decision, investor sentiment remains tense.
Sector Performance
- Winners:
- Energy: The sector rose 1.87% as oil prices climbed on OPEC+’s delay of production increases, benefiting stocks like Chevron.
- Small Caps: The Russell 2000 gained 0.4% as lower Treasury yields offered support for growth-oriented stocks.
- Losers:
- Utilities: Declined 1.21% after regulatory issues led to a sharp drop in Constellation Energy.
- Consumer Discretionary: Impacted by Marriott International, which fell 1.59% after lowering its profit forecast due to weaker travel demand.
Key Movers
- Trump Media & Technology Group (DJT.O): Rose 12.37% after initially dropping nearly 6%, as the market reacted to election uncertainty.
- Intel (INTC): Dropped 2.93% as Nvidia prepared to replace it in the Dow Jones Industrial Average.
- Constellation Energy (CEG): Fell 12.46% after the Federal Energy Regulatory Commission rejected an agreement related to a major data center project.
- Marriott International (MAR): Declined 1.59% following a reduced profit outlook due to slowing travel demand in the U.S. and China.
Economic Data
- Treasury Yields: The 10-year yield closed at 4.299%, reflecting continued volatility and investor caution ahead of the election and Fed announcement.
- CBOE Volatility Index (VIX): Increased to 21.94, signaling heightened market stress.
Outlook
This week is expected to bring heightened volatility as investors await the results of the U.S. presidential election on Tuesday, with predictions of a tight race potentially delaying the final outcome. The Federal Reserve is also widely expected to cut interest rates by 25 basis points in its policy announcement on Thursday, a move anticipated to stabilize market sentiment amid economic uncertainties. With a 98% chance of a rate cut priced in, markets will closely follow any signals from the Fed about future policy adjustments.
As earnings season winds down, the energy sector is positioned for continued growth, especially with rising oil prices and OPEC+’s delay in production hikes. However, sectors like utilities and consumer discretionary may remain under pressure due to regulatory challenges and weaker consumer demand. In the near term, markets will be highly sensitive to election developments, with investors looking for resolution to shift back to growth-focused investments.