ASX set to edge higher on RBA day; Wall Street wraps up bumper October with losses

Stocks ended lower on Wall Street, but major indexes still wound up with big gains for October, including the best month for the Dow Jones Industrial Average since 1976.

The broader S&P 500, the benchmark for many index funds, had its first monthly gain since July, as did the Nasdaq composite. The S&P 500 slipped 0.7 per cent and the Dow lost 0.4 per cent. The Nasdaq pulled back 1 per cent. The Australian sharemarket is set to edge higher, with futures at 6.46am AEDT pointing to a rise of 4 points at the open. The ASX bounced by 1.2 per cent on Monday.

Technology and communications stocks were the biggest drags on the broader market. Apple fell 1.5 per cent and Google’s parent fell 2 per cent.

Stocks have been gaining ground throughout October as investors shifted their focus to the latest round of corporate earnings. More than half of the companies within the S&P 500 have reported results and shown overall earnings growth of 2.3 per cent, according to FactSet.

Companies have so far given investors a mixed bag of results and forecasts as Wall Street tries to get a better picture of the economy. Inflation remains stubbornly hot and the Federal Reserve has been raising interest rates aggressively to try and slow down the economy and tame high prices. The strategy risks hitting the brakes too hard on economic growth and sending the economy into a recession.

Bond yields have been hovering near multiyear highs as the Fed continues to raise interest rates. The yield on the two-year Treasury, which tends to track expectations for Fed action, rose to 4.47 per cent from 4.42 per cent late on Friday.

The 10-year yield, which influences interest rates on mortgages and many other loans, climbed to 4.04 per cent from 4.02 per cent late on Friday.

Investors this week will be watching for another extra-large interest rate increase from the Fed. The widespread expectation is for it to push through another increase that’s triple the usual size next week. Wall Street is roughly split on whether it will do the same in December or shift to a smaller increase, according to CME Group.