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Market Sentiment Improves While the S&P 500 Still Has Ground to Cover

Miguel A. Rodriguez
Miguel A. Rodriguez
31 October 2023

Investment risk sentiment improves as tension in the Middle East has not extended to further areas. Global stock markets recovered slightly ahead of the Federal Reserve’s (Fed) meeting on Wednesday, which is thought to bring stability to the interest rate market. 

Global stock indices recovered slightly yesterday

After sessions of high volatility over the past week, Monday began with an improvement in investor risk sentiment. The shift in sentiment is due to Israel not going further into Gaza. At least, for now, the conflict has not spread to other countries in the area, this would be the biggest concern for the market.

Stock markets recovered globally, after indices such as the S&P 500 rose from oversold levels yesterday. Even so, the index will still experience its third monthly drop today, which is its longest streak of losses since March 2020. This streak was mainly caused by the increase in bond yields, geopolitical concerns, and disappointing earnings from some of the big, large-cap tech companies. This week the earnings of Apple Inc. will be announced, the last of the large technology companies that is pending to report its 3Q results.

Fed’s rate decision could bring stability to interest rate market

The US 10-year yields rose six basis points to 4.89%, but the fixed income market appears to have calmed down after days of unusual volatility for this market. Probably, after the Fed’s meeting on Wednesday, investors will have more information about the central bank’s future decisions, and this will help to eliminate uncertainties and bring stability to the interest rate market. The consensus in the market is that the Fed will leave interest rates unchanged, and it will indicate in its report that it has ended rate hikes. If this turns out to be true, the stock market will welcome the news.

Oil and the US Dollar lost ground

During these somewhat calmer market conditions yesterday, oil lost ground with WTI crude oil falling around $1 and the US Dollar also fell against most of its peers with EUR/USD recovering to the level of 1.0600.

EUR USD graph Oct 31 2023.png

EUR/USD monthly chart, October 31, 2023. Source: WebTrader.

Key Takeaways

  • Risk sentiment improved on Monday as tension in the Middle East is contained.
  • Global indices recovered yesterday after a volatile period.
  • Even though the S&P 500 rose yesterday, it still faces its third consecutive month of declines.  
  • Apple Inc. will announce its earnings this week.  
  • US 10-year yields rose six basis points to 4.89%.
  • Fed to announce interest rate decision on Wednesday.
  • Rates are expected to be kept stable.
  • Oil prices fell, with WTI crude oil falling around $1.
  • The US Dollar fell against most of its peers, with EUR/USD at 1.0600.

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Sources: Bloomberg, Reuters 







Miguel A. Rodriguez
Miguel A. Rodriguez

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.