US Markets on High Alert: Dow Drops 0.61% as Presidential Election Uncertainty Looms

Some Trump trading returns… Financial stocks are weak
FOMC also pays attention in November… Expected reduction of 0.25% point

▲Traders are working at the New York Stock Exchange (NYSE). New York (USA)/Reuters Yonhap News

The New York stock market fell ahead of the US presidential election on the 4th (local time).

On the New York Stock Exchange (NYSE), the Dow closed at 41,794.60, down 257.59 points (0.61%) from the previous day. The S&P 500 index ended trading at 5712.69, down 16.11 points (0.28%) from the previous trading day, and the Nasdaq index ended trading at 18,179.98, down 59.93 points (0.33%) from the previous trading day.

Ahead of the U.S. presidential election on November 5, some major stocks were sold for the purpose of adjusting their highs and taking profits. The Dow’s decline even exceeded $400 at one point.

In U.S. presidential opinion polls, the approval ratings between Democratic presidential candidate U.S. Vice President Kamala Harris and Republican presidential candidate former U.S. President Donald Trump are tightly contested. It is expected to be a close match, and it may take some time to confirm the results. “Investors are taking a wait-and-see approach,” said Michael O’Rourke, chief market strategist at Jones Trading.

On betting sites, the odds of former President Trump winning the presidential election have decreased. Investors had a tendency to bet on assets that could benefit if former President Trump is re-elected, but this has partially reversed. Selling pressure flowed into financial stocks that were expected to benefit from former President Trump’s push for deregulation.

“I think investors are trying to price in the relatively small change in perception of who will win,” said Lauren Goodwin, chief market strategist at New York Life Investments. He continued, “This election is too close to decide the winner. “No one can predict with certainty what will happen,” he added.

The market can fluctuate depending on which party controls Congress, not only in the presidential election but also in the parliamentary elections. If the two major parties divide the U.S. Senate and House of Representatives, it may be difficult to pass major law amendments. However, if the Republican or Democratic parties sweep Congress, it is highly likely that ambitious spending plans or tax reform will be implemented along with the same party winning the White House.

Among individual stocks, artificial intelligence (AI) semiconductor company Nvidia and paint company Sherwin Williams, which will be included in the Dow index starting on the 8th, showed strength. S&P Dow Jones, which manages the Dow, announced on the 1st that it will adopt Nvidia and Shawin Williams as new constituents of the Dow Jones Industrial Average, the representative U.S. stock index. Any changes will be applied before trading begins on the 8th.

The market is also paying attention to the Federal Reserve’s (Fed) decision on interest rates scheduled for this week. According to the Chicago Derivatives Exchange (CME) Group’s FedWatch tool, the Federal Reserve’s FOMC meeting in November base interest rateThe probability of a 25bp cut was reflected as 98%.

By industry, energy and real estate stocks rose 1.87% and 1.13%, respectively. The consumer staples and materials sectors also showed strength. On the other hand, other sectors showed weakness, with utilities falling 1.21%.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) recorded 21.98, down 0.10 points (0.46%) from the previous day.

International oil prices soared due to the postponement of production increase plans by oil-producing countries. On the New York Mercantile Exchange, West Texas Intermediate Crude Oil (WTI) for delivery in December, the front-month contract, finished trading at $71.47 per barrel, up $1.98 (2.85%) from the previous price. The price of Brent crude oil, a global benchmark, for January contract closed at $75.08 per barrel, up $1.98 (2.71%) from the previous day. OPEC Plus (+), which consists of the Organization of the Petroleum Exporting Countries (OPEC) and major non-member oil producing countries such as Russia, announced the previous day that it had decided to extend the 2.2 million barrel production cut for one month until the end of December.

International gold prices fell for three consecutive days. December gold futures, the center of trading on the New York Mercantile Exchange (COMEX), closed at $2,746.2 per ounce, down $3.0 (0.1%) from the previous trading session. As record highs continued to be broken throughout the previous week, profits were realized and inventory adjustments were made for sale.

The value of the US dollar fell in the foreign exchange market. In the New York foreign exchange market, the Bloomberg Dollar Spot Index, which represents the value of the dollar against the currencies of 10 major countries, fell 0.7% at one point on this day, the largest drop since August. However, the decline was later reduced.

U.S. Treasury yields fell. The 10-year maturity U.S. Treasury yield fell by 6bp (1bp = 0.01% point) to 4.295%. The two-year maturity U.S. Treasury yield fell nearly 3bp to 4.176%.