1. Moving the market

The major indexes began the session on a positive note, buoyed by anticipation of the Federal Reserve’s meeting on interest rates.

Despite the incomplete election results, traders seemed relieved, dispelling earlier concerns about a prolonged election process. However, any geopolitical news could still trigger significant and sudden swings in asset prices.

The much-anticipated Fed meeting concluded with Chair Powell announcing the expected 0.25% rate cut. Powell expressed confidence in the economy’s health, suggesting that the Central Bank would likely continue with small, incremental adjustments moving forward.

Wall Street views the second Trump administration as favorable for risk assets like stocks. However, it’s important to remember that persistent large deficits and higher tariffs could signal higher inflation ahead.

I think Powell’s decision to cut rates is questionable, especially since the Citi Economic Surprise Index has surged following the Fed’s aggressive 0.5% cut in September. Typically, rate cuts are implemented during economic downturns, not expansions. The bond markets seem to agree, as the 10-year yield has risen by approximately 0.7%, contrary to expectations.

Today, bond yields retreated, with the 10-year yield dropping 10 basis points to close at 4.34%. The stock market ended mixed, with the S&P 500 and Nasdaq continuing their rally, while the Dow and Small Caps struggled to break out.

Mega-Cap Tech stocks moved higher, the dollar weakened, which allowed gold to rebound and reclaim its $2,700 level. Bitcoin remained unstoppable, extending its gains, and reaching a new record high.

The chart of the day illustrates that the much-discussed USA Sovereign Default risk has significantly diminished following the election results.

1. Moving the market

On this election day, traders viewed the market positively, driving the major indexes out of their recent slump and buying a wide range of assets, including stocks, bonds, gold, Bitcoin, and crude oil.

Wall Street is closely monitoring not only the Presidential elections, but also which party will dominate Congress, as any sweep could lead to significant changes in spending or tax policy.

While the election results can significantly impact market direction, this uncertainty might create more short-term volatility. Historically, however, the major indexes have tended to gain between election day and the end of the year.

Traders believe that a divided Congress would be the most favorable outcome, as it would likely limit severe policy changes. Additionally, the Federal Reserve’s decision on rate cuts is expected Thursday, with a 96% chance of a 0.25% reduction.

Today, the most shorted stocks were squeezed, and bond yields fluctuated, with the 10-year yield rallying to 4.36% before reversing to close nearly unchanged at 4.29%.

The dollar declined, while gold posted a small gain. Bitcoin underwent a wild ride, reaching $70.5k before falling back to around $69k. Crude oil followed a similar pattern and ended the day higher.

Although the election results are still pending, the Federal Reserve’s upcoming interest rate announcement on Thursday is likely to add to market volatility.

1. Moving the market

The early market movements were characterized by aimless meandering with a slightly positive bias, but ultimately, the major indexes ended the day in the red.

This decline occurred despite a significant drop in bond yields, following a relentless rally that had pushed the 10-year yield above 4.3%. Today’s yield drop might indicate that traders are reducing risk by shifting from equities to bonds.

Nvidia continued its bullish surge, likely fueled by its upcoming addition to the Dow Jones Industrial Average, replacing Intel, which is being removed. Nvidia has soared over 170% year-to-date, while Intel has seen its value more than halved.

Although some polls show the Presidential race as deadlocked, the markets are more concerned with which party will control Congress. A divided House and Senate would result in a status quo, which traders favor, as it would prevent sweeping new spending plans or tax overhauls.

Later this week, the Federal Reserve will announce its latest decision on interest rates. While there is a 96% chance of a 0.25% cut, most attention will be on Chairman Powell’s commentary following the meeting.

In today’s session, big tech stocks skidded, the dollar slipped, and gold remained stagnant. Bitcoin, after reaching record highs last week, headed lower, while crude oil found some upward momentum, erasing last week’s losses.

All eyes are now on tomorrow’s election.