Day Traders Diary

10/31/22

The major averages slipped on Monday, but had a great October as the Dow capped off its best month since 1976 and all the major averages snapped a two-month losing streak. The Dow Jones Industrial Average fell 128 points, or 0.39%, to settle at 32,732. The S&P 500 shed 29 points or 0.75% to finish at 3,871 while the Nasdaq Composite tumbled 1.03% or 114 points to 10,988.

Markets made a huge comeback in October. The Dow guided those gains, soaring 13.95% for the month. The 30-stock finished its best month since 1976 as investors bet on more traditional companies, like banks, to lead the next bull. The S&P and Nasdaq gained about 8% and 3.9%, respectively, for October.

October's gains have come despite a mixed third-quarter earnings season, which has shown slowing growth and major disappointments from large tech companies such as Meta Platforms and Amazon. Those names led Monday's tech losses as investors drifted out of the growth sector.

Traders are preparing this week for the latest Federal Reserve meeting beginning Tuesday. The central bank is widely expected to hike interest rates by 75 basis points on Wednesday. Many on Wall Street are looking for a signal from the Federal Open Market Committee's statement or Chairman Jerome Powell's press conference that the Fed could pause its hikes or reduce their size in the near future.

Earnings season continues this week with reports from Uber, Pfizer and Advanced Micro Devices. Investors are also looking ahead to October jobs data due out Friday.

BlackRock says central banks are on a path to overtightening

BlackRock said the markets are rallying on hopes that policy tightening is coming to an end, which it thinks is premature.

"We see central banks on a path to overtighten policy," Jean Boivin, head of BlackRock Investment Institute, said in a note. "We think the Fed, like other developed market central banks, will only stop when the severe damage from rate hikes is clearer."

The asset manager said rates have already hit levels that may trigger a recession. BlackRock said it remains underweight stocks and government bonds.