The S&P 500 ended lower on Monday as investors took a cautious stance ahead of both the upcoming presidential election and the Federal Reserve's rate decision later this week.
 

A Tight Presidential Race Looms, Stirring Market Concerns

As the U.S. presidential election approaches on Tuesday, investors are on edge, with recent polls showing a tight race between Donald Trump and Kamala Harris. Market activity has reflected this uncertainty, with rising dollar and Treasury yields indicating that some investors are positioning for a potential Trump victory, which could usher in more inflationary policies.

Analysts warn that the election outcome could have significant implications for the stock market, particularly for Big Tech. Wedbush analysts, in particular, expressed concern over how a Trump win could exacerbate tensions in the U.S.-China tech conflict and lead to the imposition of new tariffs, negatively affecting the global tech sector.
 

“A major shift in tariffs and a tougher stance on China would likely disrupt the supply chain, with companies like Nvidia (NASDAQ: NVDA) potentially facing Beijing’s retaliatory measures. We could also see an impact on Apple and Tesla, as well as a slowdown in the pace of AI innovation,” wrote Dan Ives and his team in a note to clients.
 

Meanwhile, Nvidia (NASDAQ: NVDA) is poised to join the Dow Jones Industrial Average this Friday, replacing underperforming chipmaker Intel, marking a significant shift in the index composition.

The quarterly earnings season is also in full swing, with approximately 20% of S&P 500 companies set to report their latest results this week, adding another layer of market focus amid the political and economic uncertainty.

Earnings Season Continues, with Mixed Results
 

Berkshire Hathaway Inc. (NYSE: BRK.A) reported weaker-than-expected Q3 operating earnings of $10.1 billion, falling short of analyst forecasts, which led to a 2% drop in its stock. Marriott International (NASDAQ: MAR) saw a 1.6% decline after lowering its annual profit forecast, citing weak domestic travel demand in the U.S. and China. Viking Therapeutics (NASDAQ: VKTX) plunged 13% as concerns over its ability to mass-produce its oral weight-loss drug outweighed positive Phase 1 trial results.
 

Fed Set to Cut Rates

This week, the Federal Reserve's meeting is in the spotlight, with markets anticipating a 25 basis point interest rate cut, following a 50 basis point reduction in September. The central bank's decision will be closely scrutinized, as investors seek insight into the Fed's future monetary policy, particularly in light of recent U.S. economic data showing resilience alongside persistent inflationary pressures. 

Analysts, including those at UBS, expect the Federal Open Market Committee (FOMC) to follow through with a 25 bps cut, but caution that Fed Chair Jerome Powell is unlikely to commit to a definitive rate-cutting trajectory. This caution stems from the Fed’s data-driven approach to policy, where decisions are closely tied to economic conditions.

The meeting comes amid mixed economic signals, including weaker-than-expected job growth in October. The latest nonfarm payrolls report showed a sharp slowdown in hiring, with downward revisions to prior months' data suggesting that the labor market may be cooling. This could temper expectations for further aggressive rate cuts, as inflation remains sticky despite signs of slowing economic momentum. Market participants will be keen to hear Powell’s comments on the economy's trajectory and how the Fed plans to navigate this complex landscape of economic growth and inflation.
 

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.