Investors on Fed Watch.

The U.S. equity markets gained ground amid some upbeat economic reports, but the advances were tempered as investors await tomorrow’s monetary policy decision. Earnings again dominated the equity front with mixed results. Treasury yields were mixed and little changed, while crude oil prices were higher, gold was lower and the U.S. dollar was flat.

The Dow Jones Industrial Average (DJIA) rose 29 points (0.1%) to 23,377, the S&P 500 Index ticked 2 points (0.1%) higher to 2,575, and the NASDAQ Composite increased 29 points (0.4%) to 6,728. In moderate volume, 871 million shares were traded on the NYSE and 2.0 billion shares changed hands on the NASDAQ. WTI crude oil rose $0.23 to $54.38 per barrel and wholesale gasoline gained $0.02 to $1.73 per gallon. Elsewhere, the Bloomberg gold spot price fell $5.33 to $1,270.96 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 94.52.

The Q3 Employment Cost Index rose by 0.7% quarter-over-quarter (q/q), matching the Bloomberg forecast, and compared to the 0.5% gain seen in Q2. The 20-city composite S&P Core Logic Case-Shiller Home Price Index showed a 5.9% y/y gain in home prices in August, matching expectations. Month-over-month (m/m), home prices were up 0.5% on a seasonally adjusted basis for August, above forecasts calling for a 0.4% rise.

The Consumer Confidence Index increased to a level of 125.9 in October from the upwardly revised 120.6 in September, and compared to the Bloomberg estimate of a 121.5 reading. Both the Present Situation Index and the Expectations Index of business conditions for the next six months improved. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—increased to18.8 from the 14.7 level posted in September.

The Chicago Purchasing Managers Index unexpectedly ticked further into expansion territory (above 50) for October, after rising to 66.2 from September’s unrevised 65.2 level, and versus expectations calling for a decline to 60.0. The index moved to its highest level since May 2011 as prices paid declined, but order backlogs hit a high not seen in over forty years.

Treasuries were mixed, but little changed, as the yields on the 2-year and 10-year notes increased 2 basis points to 1.60% and 2.38%, respectively, while the 30-year bond rate dipped 1 basis point up to 2.87%.

Schwab Center for Financial Research – Market Analysis Group

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