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US markets mixed after last week’s rally

US markets mixed after last week’s rally

After an uneven trading US stock indexes finished Monday session little changed. Investors have adopted a wait and see approach ahead of the Federal Open Market Committee meeting and further corporate earnings reports. The S&P 500 index lost 2.95 points, or 0.2%, to 1961.63. The Dow Jones Industrial Average added 12.53 points, or 0.1%, to 16817.94. The Nasdaq Composite Index gained 2.22, or less than 0.1%, to 4485.93. Investors preferred the safety of defensive stocks over cyclical businesses that tend to be more responsive to changes in the state of overall economy.

The gains in defensive stocks – shares of big companies in consumer staples, utilities and telecom that tend to pay dividends and are more stable in business cycles, were offset by big losses in cyclical shares- energy and materials companies that are more dependent on economy. Energy shares were the most actively traded, and their decline pulled the S&P 500 index down. The S&P 500 Energy sector index declined 2% and has dropped 15.4% in the last three months due to sliding oil prices. Shares of Exxon Mobil fell 0.8%. Investors are waiting to see what the Federal Open Market Committee will decide as the US central bank holds a policy meeting today and Wednesday. The Fed is expected to announce the completion of its quantitative easing program.

It is widely anticipated that the Federal Reserve will likely reinforce its stated willingness to wait a long time before hiking interest rates after a volatile month in financial markets. Data on Monday showed U.S. services sector activity slowed in October to a six-month low, while manufacturing output in Texas decreased. Based on the recent data of weak US inflation, troubled state of European economy and strengthening dollar, it is more likely that the Fed will not indicate plans for early interest rate hikes as the current global growth slowdown and disinflationary pressures negatively affect the US recovery. It should be noted that the Federal Reserve expected the US recovery would continue to strengthen which would allow them to raise interest rates around middle of the next year. Today at 13:30 CET Durable Goods Orders for September will be released in US, the forecast is positive. At 15:00 CET the Conference Board Consumer Confidence Index will be published. The tentative outlook is positive.

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