U.S. stock market rallies as greenback falls on Monday

The U.S. stock market rallied on Monday while the greenback plunged ahead of the 2022 mid-term elections.

The Dow Jones grew by 1.3 percent, the S&P 500 rose 0.90 percent and the Nasdaq Composite gained 0.85 percent. The indices started the trading day choppily before rallying near the closing.

Analysts have speculated that investors in the U.S. are weighing the results of the mid-term elections. Republicans are expected to take over Congress, which can make it difficult for the current administration to pass laws.

However, Inverness Counsel chief investment strategist Tim Ghriskey said that the midterms would not have “that big of an influence” on the equity market, adding that the Fed’s policy stance and the Ukraine War had more profound impacts.

Convera senior market analyst Joe Manimbo shared a similar opinion, saying that investors wanted the Fed to pivot on its tight monetary stance.

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"It will take anything it can get in terms of signs of a softening economy to hold out hope that a pivot might materialize sooner rather than later,” Manimbo explained.

The U.S. dollar, which strengthened in the past months, saw a decline on Monday as investors awaited a policy pivot by the Fed. This development caused other currencies to grow against the dollar. The euro went up by 0.68 percent to $1.0028, while the yen raised 0.06 percent to 146.52 per dollar.

Like in the U.S. stock market, most stocks in other parts of the world also saw price growth on Monday. MSCI's all-country world index grew by 1.12 percent, while the STOXX 600 index went up by 0.33 percent. The FTSE 100 in London was the only major index in Europe to close lower.

U.S. investors are waiting for October’s consumer price index (CPI) on November 10. The data will be another indicator of an upcoming rate hike by the central bank. According to median forecasts, the annual inflation rate would go down to eight percent. The core inflation is expected to be 6.5 percent.

Meanwhile, the two-year Treasury yield, which usually moves according to rate expectations, rose to 4.726 percent. The 10-year Treasury yield also gained 4.214 percent on Monday. Analysts described the yield curve as “deeply inverted” at -51.7 basis points, showing the possibility that the economy would enter a recession.

BTC more stable than stocks, fiat

Amid the current situation in the traditional financial market, a number of analysts proposed that crypto tokens like BTC offered better stability. When the U.S. dollar index dropped by two percent on November 5, BTC/USD trade maintained the $21,000 trend.

Adaptive Capital researcher David Puell explained that the 30-day realized volatility of BTC was “nearly equivalent” to the sterling and the euro for the first time since 2016. Puell added that BTC’s strength relative to fiat was an “encouraging sign,” despite the possibility of another sizable rate hike by the Fed.

ARK Invest crypto analyst Yassine Elmandjra said that BTC was more stable than the S&P 500 and the Nasdaq Composite. Several other analysts referred to data in the past which showed that low volatility in BTC prices usually led to a major rally.