31.10.202210:01 Forex Analysis & Reviews: US market set for rally, investors await Fed meeting

S&P 500

Review for October 31, 2022

The US market closed higher on Friday.

Major US indices made notable gains on Friday: the Dow Jones added 2.6%, the S&P 500 rose by 2.5%.

S&P 500: 3,901. Trading range: 3,850 - 3,950.

On Monday, investors received some reports on the Chinese economy. The indices measuring activity in the manufacturing and services sectors fell to 49 and 48 respectively. Readings below 50 indicate contraction in activity.

Energy: oil moderately declines at the beginning of the week, but Brent crude oil is trading at the level of 95 dollars per barrel.

At the end of the previous trading week, the US market received important statistics on inflation and GDP for the third quarter. The US economy grew at an annual better-than-expected rate of 2.6% in the third quarter, while the GDP deflator came out below analysts' forecasts, standing at 4.6%, two times lower than 9% in the 2nd quarter.

The personal consumption expenditures (PCE) price index rose by 0.3%.

In general, the news could allow the US central bank to slow down the pace of its rate hikes after November.

The Fed's decision on interest rates will be released next Wednesday. According to forecasts, the regulator will most likely raise its target interest rate by three-quarters of a percentage point.

This week's macroeconomic calendar also includes important statistics such as reports on business activity for October to be released on Tuesday and Thursday. The indices measuring activity in the manufacturing and services sectors are expected to stand at 49.8 and 55 respectively.

On Friday, the United States will report jobs data for October. Non-farm payrolls are forecast to increase by 220,000, while the unemployment rate is anticipated to be 3.5%.

A drop in Amazon.com Inc's (AMZN 295.72, -7.55, -6.8%) shares after the disappointing fourth-quarter revenue forecast was offset by Apple's strong earnings growth (AAPL 155.74, +10.94, +7.6%). The stock market showed impressive resilience on Friday. Buyers remained strong when the 10-year Treasury yield ended the trading session above 4.00%, rising by 7 basis points to 4.01%.

The yield on two-year Treasuries also rose significantly today, climbing by 9 basis points to 4.42%.

Except for Amazon, mega-cap stocks showed strong gains. The Vanguard Mega Cap Growth ETF (MGK) closed up 2.8% versus a 2.5% gain in the S&P 500 and a 2.1% gain in the Invesco S&P 500 Equal Weight ETF (RSP).

S&P 500 sector performance reflected the broad nature of today's buying. Ten out of eleven sectors closed with gains thanks to information technology companies (+4.5%).

The sector was also supported by gains in Apple and Intel ( INTC 29.07, +2.80, +10.7%), driven by favorable quarterly results.

On the other hand, consumer discretionary stocks (-0.3%) were the worst performers due to Amazon's heavy losses. However, the sector recovered from a 3.8% loss.

Advancers led decliners by a greater than 3-to-1 margin at the NYSE and a 2-to-1 margin at the Nasdaq.

From a technical point of view, the S&P 500 index closed above the 100-day moving average and rested on the 50-day moving average. Notably, the market has failed to end the session above the 50-day moving average since September 13. Closing above MA50 signals that the market's decline is coming to an end.

Over the past two weeks, the market has added about 8%.

Conclusion: The rally in the US market may continue until Christmas, especially if the Fed starts talking about slowing the pace of its rate hikes at the November meeting.