Wall St closes higher on eve of Fed decision; investors assess earnings -October 31, 2023 at 04:00 pm EDT

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Oct 31 (Reuters) –

Wall Street’s main indexes closed higher on Tuesday as
investors looked ahead the Federal Reserve’s monetary policy
update while they digested a mixed batch of earnings reports.

The Fed kicked off a two-day monetary policy meeting at
which the central bank is widely expected to hold interest rates
steady. Investors will monitor Fed Chair Jerome Powell’s
comments for clues about its future plans.

Investors were also reacting to disappointing earnings
reports and showed jitters over geopolitics.

Shares in heavy-machinery maker Caterpillar fell as
signs of slowing machinery demand overshadowed a quarterly
earnings beat. And drugmaker Amgen’s stock lost ground
as third-quarter sales of some high-profile medicines were below
expectations.

But with 10-year Treasury yields up just slightly, some
investors took the opportunity to look for bargains after recent
weakness in stocks, said Sameer Samana, Senior Global Market
Strategist at Wells Fargo Investment Institute.

“All roads right now lead back to long-term rates which
impact equities,” said Samana, adding that in stocks some
investors may be encouraged by the idea that, “the recent
sell-off brings us back to fairly valued from over-valued
levels.”

However the strategist was wary of upcoming events that
could be huge catalysts for bonds and in turn equities. Along
with the Fed’s policy update, he will also watch the U.S.
Treasury Department’s announcement about its financing plans.

Analysts have said it is likely to boost the size of
auctions for bills, notes, and bonds in the fourth quarter to
fund a widening budget deficit. This would cause rates to rise
further and hurt stocks, according to Wells Fargo’s Samana.

And on Friday, equity investors will also be monitoring
the October U.S. jobs report and the Treasury market’s reaction.

According to preliminary data, the S&P 500
gained 26.93 points, or 0.65%, to end at 4,193.75 points,
while the Nasdaq Composite gained 61.76 points, or
0.48%, to 12,851.24. The Dow Jones Industrial Average
rose 123.01 points, or 0.37%, to 33,051.97.

“Today’s move back into positive territory is on the growing
consensus the Fed is more likely to hold off on any more rate
hikes this year,” said Greg Bassuk, chief executive of AXS
Investments in New York.

Bassuk also pointed to mixed earnings reports and companies
“messaging concerns about upcoming quarters with energy prices
rising and increasing uncertainty” around wars in Israel and
Ukraine that are “showing no end in sight.”

Earlier, data showing a solid increase in U.S. labor
costs in the third quarter prompted some concerns the Fed could
keep interest rates higher for longer.

Of the 279 companies in the S&P 500 that have reported
earnings to date, over 78% have beaten analyst estimates, per
LSEG data. Analyst expect earnings growth of 4.9% for S&P 500
companies in the third quarter.

Nvidia shares fell after a report said the latest
U.S. curbs could force the chip designer to cancel billions of
dollars of orders to China.

Pinterest shares rallied after the image-sharing
platform beat third-quarter revenue and profit estimates.

VF Corp shares sold off after the Vans sneaker maker
withdrew its annual forecast. Arista Networks stock
rallied after it gave an upbeat fourth-quarter revenue outlook.

Sarepta Therapeutics shares plummeted on the
failure of its muscle disorder gene therapy in a late-stage
trial. Shares of Sarepta’s client, Catalent, also fell.

(Reporting by Sinéad Carew in New York, Amruta Khandekar and
Shashwat Chauhan in Bengaluru; Editing by Saumyadeb Chakrabarty,
Shounak Dasgupta and Maju Samuel and David Gregorio)