MARKET WRAPS
Watch For:
Employment Cost Index for 3Q; S&P CoreLogic Case-Shiller Home Px Index for August; Chicago Business Barometer -- ISM-Chicago Business Survey -- Chicago PMI for October; Conference Board -- Consumer Confidence for October, Canada GDP for August; Earnings from Caterpillar, GE HealthCare Technologies, Pfizer
Today's Top Headlines/Must Reads:
- Workers Keep Getting Big Raises. That's a Problem for the Fed
- The Money Has Stopped Flowing in Commercial Real Estate
- America's Offshore Wind Ambitions Are Coming With Bigger Price Tags
Opening Call:
Stock futures were mildly mixed early on Tuesday, holding most of the previous day's rally as Treasury yields moved lower.
The 10-year Treasury yield dipped to 4.83% after only a minor tweak to monetary policy by the Bank of Japan was seen leaving Japanese government bonds relatively unattractive and thus supporting demand for U.S. debt. The dollar jumped back above Yen150.
News on Monday that the Treasury was planning to borrow less than expected this quarter and would thus have to issue less paper was also seen underpinning bond prices. The Treasury will announce its third quarter refunding program on Wednesday.
Another factor helping suppress Treasury yields, and therefore possibly helping sentiment in equities, was data showing manufacturing in China nudged back into contraction unexpectedly in October.
Such signs of a struggling global economy will be in the Federal Reserve's thinking as it begins its two-day policy meeting on Tuesday. It is expected midweek to leave rates unchanged at a range of 5.25% to 5.50%.
"In the absence of a surprise rate decision, or a surprise forward guidance about a rate decision, what will really, really matter this week...is the US debt situation, and the Treasury Department's quarterly announcement on details regarding the size and the maturity of the bonds that they will issue to borrow that extra $776 billion this quarter," Swissquote Bank said.
Premarket Movers
Anheuser-Busch backed its full-year guidance despite reporting a decline in North American volumes, as the fallout from a promotion with transgender influencer Dylan Mulvaney continues. U.S.-listed shares climbed 2.3% premarket.
Arista Networks reported higher quarterly profits and revenue and signaled demand for its cloud and artificial-intelligence offerings remains strong. Shares rose 9% premarket.
BP's quarterly results missed analysts' expectations and the company warned its refining margins would be lower in the months ahead. BP's U.S.-listed shares fell about 4% premarket.
Pinterest swung to a profit and posted double-digit revenue growth in the third quarter, topping Wall Street's expectations. Shares rose 15%.
VF pulled its guidance for its current fiscal year, slashed its dividend and said it would replace the president of its Vans brand. VF has come under pressure from activist investors this month. Shares fell 7%.
Monday's Post-Close Movers
Amkor Technology said Monday that third-quarter profit and revenue both fell. The company guided for another quarterly drop in profit and revenue in the fourth quarter. Shares fell 16%.
Trex's revenue rose 62% and its profit more than quadrupled in the third quarter as demand for its wood-substitute building products held up. The company's higher sales and efficiencies in production boosted margins in the period. Shares rose 9.7%.
Forex:
The Fed's upcoming meeting on Wednesday could cause volatility in the dollar, which has stayed fairly steady throughout this month, https://urldefense.com/v3/__http://Capex.com__;!!F0Stn7g!G0b9BvsjYXW6zBOk3ONl0MFV1iJ5k2GeKwU4T4soM5KzHgcHz8qRB0D12llEFhGuqc8_6djDLFQDQdxpSMco37k7Fql1gprbgOiCcH9E7qs$ Middle East said.
The Fed is expected to keep interest rates unchanged, but comments by Jerome Powell accompanying the decision "could fuel volatility and could affect traders' expectations about the direction of monetary policy."
Economic data are likely to continue to broadly support the currency, https://urldefense.com/v3/__http://Capex.com__;!!F0Stn7g!G0b9BvsjYXW6zBOk3ONl0MFV1iJ5k2GeKwU4T4soM5KzHgcHz8qRB0D12llEFhGuqc8_6djDLFQDQdxpSMco37k7Fql1gprbgOiCcH9E7qs$ added.
EUR/USD's current trend is likely part of a consolidation phase, based on technical charts, UOB said.
The currency pair's recent rebound that breached both falling trendline resistance and the 55-day exponential moving average suggests that EUR/USD's weakness has stabilized, though it is too early to expect a sustained recovery, it added.
For the next two months, EUR/USD is likely to trade between 1.0450 and 1.0730.
Energy:
Oil prices started to recover, having fallen sharply on Monday, with markets taking stock of the current situation in Gaza.
The fall came despite the clear upside risks still facing the market in the current geopolitical environment, ING said.
"Disruptions to Iranian oil flows remain the most obvious risk to the market," it said, but notes that for now the conflict remains limited to Gaza and Israel.
"In the absence of supply disruptions from the region, it is difficult to see a significant and sustained upside in prices."
According to UBS, fundamentals will be key in driving oil prices , with the effect of the Israel-Hamas war on crude starting to wane.
The bank says it expects oil to trade in a band of $90-100 a barrel over the next 12 months, but this will be driven by fundamentals rather than sentiment.
Metals:
Base metals wavered, while gold edged lower, as investors looked ahead to the Federal Reserve's interest policy decision Wednesday.
"Investors are nervous about new geopolitical risks, soft corporate earnings, and elevated interest rates ahead of tomorrow's Federal Reserve policy decision and U.S. government funding plans," Peak Trading Research said.
Peak said that it is likely the Fed will hold rates steady, but added that Powell's comments and how forward-looking Fed expectations shift the U.S. dollar will be more important for commodities.
TODAY'S TOP HEADLINES
Vodafone to Sell Spanish Unit to Zegona Communications for Around $5.3 Bln
Vodafone Group has agreed to sell its Spanish unit to European telecommunications investment company Zegona Communications for an enterprise value of around 5 billion euros ($5.31 billion).
The U.K.-based telecommunications group on Tuesday said the deal is for 100% of Vodafone Spain.
X Offers Employees Stock Grants Valuing the Company at $19 Billion
X Corp. told employees that it is worth approximately $19 billion, showing the value of Elon Musk's social-media platform remains far below its acquisition price a year ago as Musk has rolled out a raft of changes.
X is granting employees stock grants at a price of $45 a share, which translates to a company valuation about 55% below the price of Musk's $44 billion takeover in October 2022, according to an internal document reviewed by The Wall Street Journal. In March, Musk told employees they would receive stock awards based on a roughly $20 billion valuation.
Hong Kong's Economic Growth Accelerates in Third Quarter
Hong Kong's economic growth sped up in the third quarter, mainly thanks to the further improvement of domestic demand and service-sector activity.
Gross domestic product expanded 4.1% in real terms in the third quarter from a year earlier, advance estimates from the government showed Tuesday. That compares with the 1.5% expansion recorded in the second quarter.
Democrats Risk Long-Lasting Rift Over Israel-Hamas War
To many on the left, the Israel-Hamas war is spurring what feels like a permanent rupture, when previously sublimated differences become impossible to ignore and everyone must choose sides.
The weeks since the Hamas attacks have riven the liberal coalition, pitting erstwhile allies against each other as ugly accusations fly in both directions. From the halls of power in Washington to street protests and social media, progressives find themselves at odds with those they once saw as kindred spirits.
Israeli Forces Make Major Advance Toward Gaza City
TEL AVIV-Israeli tanks and infantry temporarily seized control of a strategic road linking the Gaza Strip's north and south, a major advance that appeared aimed at encircling the enclave's biggest population center, Gaza City.
The thrust through the center of Gaza marked the deepest push into Palestinian territory since Israeli ground troops entered the strip late last week, starting a new phase in its war to eradicate Islamist militant group Hamas following the surprise Oct. 7 attacks. The Israeli military and Hamas said there were clashes between troops and militants Monday, and Israel said its forces had freed a soldier taken prisoner on Oct. 7 in what appeared to be the first such rescue of a hostage in Gaza.
Biden's 'Junk Fee' Crackdown Comes for Retirement Advice
Americans rolling over their money into an individual retirement account from a 401(k) will have more protections on the advice they get as part of a Labor Department proposal released Tuesday.
Under a 1974 federal law that governs retirement accounts, employers have a duty to manage 401(k) plans in the best interest of employees, including to vet the investments and fees. Known as Erisa, the law also imposes this fiduciary standard on advisers to act in a client's best interest when giving advice in 401(k)s.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Cameco 3Q
Centerra Gold 3Q
Equinox Gold 3Q
First Ntnl Fnc 3Q
Intl Petroleum 3Q
Economic Calendar (ET):
0830 Aug GDP
Stocks to Watch:
TMX Group 3Q EPS C$0.31; 3Q Rev C$287.3M; 3Q Adj EPS C$0.35
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Toromont 3Q EPS C$1.76; 3Q Profit C$145.6M; 3Q Revenue $1.17B
Expected Major Events for Tuesday
00:01/UK: Oct Shop Price Index
04:30/JPN: Sep Preliminary Report on Petroleum Statistics
05:00/JPN: Oct Consumer Confidence Survey
05:00/JPN: Sep Housing Starts
05:00/JPN: Sep Construction Orders
(MORE TO FOLLOW) Dow Jones Newswires
10-31-23 0612ET
