Stocks edge up to record, dollar slips before Fed meeting, earnings eyed

By Chuck Mikolajczak

NEW YORK (Reuters) -Global shares notched an intraday record high on Tuesday, on track for a fourth straight session of gains, buoyed by signs of cooling trade tensions between the U.S. and China, while investors awaited the Federal Reserve’s policy decisions and digested corporate earnings.

The U.S. Federal Reserve will kick off on Wednesday a string of policy announcements from global central banks, including those of Japan, Canada, and Europe, this week. 

The Fed is widely expected to cut interest rates at the meeting, with markets pricing in a 97.8% chance for a rate cut of 25 basis points, according to CME’s FedWatch Tool.  

Expectations for a lower path of interest rates from the central bank, along with recent signs trade tensions between the U.S. and China were easing, have helped boost risk appetite, sending stocks higher and keeping the 10-year U.S. Treasury yield moored near multi-month lows. 

In addition, the ongoing U.S. government shutdown has led to a dearth of economic data for investors to parse. 

CONTINUED RALLY SEEN IN RISKY ASSETS

With the lack of government data, investors have eyed other sources to try and gauge the strength of the economy. On Tuesday, the ADP National Employment Report’s inaugural weekly preliminary estimate showed U.S. private payrolls increased by an average of 14,250 jobs in the four weeks ending October 11. 

“Volatility has been extraordinarily low and kind of, in some respects, surprising given all of the uncertainties … but it seems to be very, very stable, and you’re seeing the sort of continued rally in risky assets,” said Subadra Rajappa, head of U.S. rates strategy at Societe Generale in New York. 

“So you have a combination, especially for the Fed meeting, of lower yields, easier financial conditions, inflation coming off, the job market remaining somewhat stable as well, so it’s been a tough read on the economy.”

The European Central Bank and Bank of Japan are largely expected to keep rates unchanged at their policy meetings. 

DOW LEADS GAINS AMONG MAJOR INDEXES

On Wall Street, U.S. stocks rose, boosted in part by a 2.1% advance in Microsoft  after reaching a deal that allows OpenAI to restructure into a public benefit corporation while giving the megacap company a 27% stake in the ChatGPT maker.

Also providing support was a 5.5% gain in Sherwin-Williams after the paint and coatings company reported quarterly earnings that topped expectations. 

The Dow Jones Industrial Average rose 281.40 points, or 0.59%, to 47,826.92, the S&P 500 added 6.05 points, or 0.09%, to 6,881.21, and the Nasdaq Composite rose 50.84 points, or 0.22%, to 23,688.29, with each touching intraday records.    

“It’s been pretty impressive from our view that we continue to hit all-time highs. Tech and AI and the Big Seven have been driving performance as of late, but earnings have been good as well,” said Jack Herr, primary investment analyst at GuideStone.

Equities have rallied of late as U.S. President Donald Trump and his Chinese counterpart Xi Jinping are due to meet on Thursday to decide on a framework that could pause tougher U.S. tariffs and China’s rare-earth export curbs, easing market worries about a potential trade war.

Earnings are expected this week from “Magnificent Seven” heavyweights Microsoft, Alphabet, Apple, Amazon and Meta Platforms. Investors will closely eye the results to see if they justify lofty valuations.

MORE THAN FOUR IN FIVE S&P COMPANIES BEAT EXPECTATIONS

Of the 180 S&P 500 companies that have reported earnings through Tuesday morning, 86.7% have topped analyst expectations, according to LSEG data. 

MSCI’s gauge of stocks across the globe advanced 2.18 points, or 0.22%, to a record 1,014.68 while the pan-European STOXX 600 index closed down 0.22%

The yield on benchmark U.S. 10-year notes fell 1.6 basis points to 3.981%. 

The dollar index, which measures the greenback against a basket of currencies, fell 0.09% to 98.68, with the euro up 0.15% at $1.1661.

Against the Japanese yen, the dollar weakened 0.46% to 152.16 after comments from a Japanese minister and U.S. Treasury Secretary Scott Bessent eased some concerns about more expansive fiscal and monetary policy in the country.

Sterling weakened 0.45% to $1.3275.

U.S. crude fell 2.07% to $60.04 a barrel, and Brent fell to $64.26 per barrel, down 2.07% as investors assessed the effect of U.S. sanctions on Russia’s two biggest oil companies along with a potential OPEC+ plan to raise output.

(Reporting by Chuck Mikolajczak; Additional reporting Johann M Cherian and Twesha Dikshit in Bengaluru, Samuel Indyk in London and Wayne Cole in Sydney; Editing by Joe Bavier and Rod Nickel)