MARKET WRAPS
Watch For:
Earnings from McDonald's
Today's Top Headlines/Must Reads:
- Higher Bond Yields Could End the Fed's Historic Rate Rises
- Does Strong Growth Fuel Inflation? Fed Debates Whether Old Model Still Applies
- Biden to Use Emergency Powers to Mitigate AI Risks
Opening Call:
Stock futures rose on Monday as traders eye busy week containing jobs data, central bank action and Apple earnings.
Stock buyers returned after the S&P 500 on Friday joined the Nasdaq Composite in correction territory having shed more than 10% from its recent high at the end of July to close at its lowest since May.
Relief that the Israel-Hamas war had not drawn in other combatants in the region over the weekend was helping sentiment.
"The conflict did not appear to have broader spillover effects in the Middle East," SPI Asset Management said.
"That sliver of 'good news' has seen the demand for safe-haven assets ease after Israel's military action in Gaza took a more cautious approach than initially anticipated."
Equity benchmarks also have been hit of late partly because of some poorly-received third quarter earnings - notably from big technology firms. The next tech behemoth to present its numbers will be Apple after market close on Thursday.
Another factor pressuring equities over the past several weeks was the lurch higher in benchmark bond yields to 16-year highs above 5% on concerns a robust economy will force the Fed to keep interest rates high for longer and amid fears additional Treasury issuance will push down prices.
Both of those issues will be addressed on Wednesday, when the Treasury will publish its quarterly refunding announcement in the morning, followed in the afternoon by the Fed's latest interest rate decision.
Powell is expected to leave borrowing costs unchanged at a range of 5.25% to 5.50%, so investors will be keen to hear if he gives any clues about Fed trajectory in coming months.
The Bank of England is also expected to stand pat on Thursday, while the Bank of Japan on Tuesday has the potential to rattle markets should it make comments on relaxing its yield curve control policy.
Premarket Movers
Former Marvel executive Isaac "Ike" Perlmutter has entrusted his stake in Disney to Nelson Peltz's Trian Fund Management as it prepares to press the entertainment company for multiple board seats, WSJ reported. Disney shares were up 0.5%.
The United Auto Workers union announced late Saturday that workers would go on strike at another General Motors plant hours after the union announced it had reached a tentative agreement with Jeep maker Stellantis. GM shares rose 0.8%.
Stellantis, meanwhile, was hit with a strike in Canada by labor union Unifor after talks over a tentative labor contract stalled. The strike began early Monday. The negotiations in Canada are separate from talks between the UAW and Stellantis in the United States. Stellantis was up 1.6%.
Friday's Post-Close Movers
Coherus BioSciences secured FDA approval for its treatment for nasopharyngeal cancer when combined with chemotherapy. The treatment, called Loqtorzi, is set to become available in the U.S. in the first quarter of 2024. Shares rose 33%.
FOXO Technologies said it would enact a 1-for-10 reverse stock split in order to regain compliance with NYSE listing requirements. The company said the split would become effective Nov. 6. Shares fell 12%.
Intuitive Machines scheduled a lunar launch in coordination with SpaceX for Jan. 12. The mission includes a lunar lander and is part of a NASA initiative. Shares rose 19%.
Economic Insight
The Fed is finished with interest-rate hikes, while rate cuts aren't expected anytime soon, Jefferies said.
Jefferies has penciled in only one Fed rate cut before the Presidential elections, "also driven by the Fed's desire to be neutral into the Presidential elections."
Jefferies, however, expects "aggressive" cuts in 2025, as rates would be well above neutral, inflation likely below target and the economy growing below potential.
Markets are pricing a total of 73 basis points of Fed rate cuts in 2024, according to Refinitiv.
Forex:
The dollar should continue to hover close to multi-month highs, although it would be vulnerable to any slide in U.S. bond yields, DHF Capital said.
"Overall, the dollar index stayed near this year's high [for most of this month] and could continue to see strength."
Energy:
Oil prices moved lower in early trading, despite Israel stepping up its campaign in Gaza via land and aerial bombardment over the weekend.
Markets for now are seemingly thinking the conflict in Gaza will remain isolated, however ANZ said that any spillover into the wider region could threaten supply.
"The escalation of the war raises the risk around supply disruptions that have been hanging over the market since Hamas's attack," it said, adding that "up to 20 million barrels a day of oil is at risk either directly and through obstructed logistic if other Middle East oil producers become involved."
Metals:
Base metals and gold prices were rising as investors awaited key policy decisions from several central banks this week.
This is a big macro week, Peak Trading Research said, with the Fed decision due Wednesday and employment data due Thursday.
Peak said the Fed is likely to hold rates steady, but more importantly will be what the Fed says in its comments after regarding data and geopolitical risks.
Strong data would likely mean a strong dollar, it added.
TODAY'S TOP HEADLINES
For China, Bullying Apple Suppliers Could Backfire Badly
China's surprise investigation into Apple supplier Foxconn, a key link in the iPhone supply chain, may be intended to send a message. The one Apple and its suppliers actually receive might do China more harm than good.
Chinese authorities have launched tax and land-use probes into subsidiaries of Foxconn, formally known as Hon Hai Precision Industry, the company confirmed last week. That is surprising since Foxconn, which is the world's largest contract electronics manufacturer, has long had an amicable relationship with China-and is one of the biggest employers in the country.
HSBC Holdings Third-Quarter Net Profit More Than Doubled
HSBC Holdings PLC's third-quarter net profit more than doubled as the London-based banking giant continued to benefit from higher interest rates and sharply higher noninterest income.
The Asia-focused lender posted net profit of $5.62 billion for the three months to Sept. 30, up from $2.00 billion in the year-earlier period, it said Monday. HSBC's pretax profit, the bank's preferred profit measure, rose to $7.71 billion from $3.23 billion.
Omnicom Buys E-Commerce Shop Flywheel Digital for $835 Million
Advertising holding company Omnicom said it has agreed to acquire Flywheel Digital for a net cash purchase price of approximately $835 million, in what it says is its biggest acquisition ever.
Flywheel is the digital commerce arm of Ascential, a U.K.-based business-to-business media, events and analytics company that owns the Cannes Lions advertising festival. Flywheel offers services designed to help brands sell on digital marketplaces operated by companies including https://urldefense.com/v3/__http://Amazon.com__;!!F0Stn7g!HFzpL08r9zeZyFou5RgRXfkKkjAlZWy5nw-7bhpyUZnbeZWYacA8kskQcBmgJyHs0F6nOktv2d8KQ3PHrW1wG-Z267QLYturJjPVuQIijCs$ , Walmart and Alibaba.
IFF to Sell Cosmetics Ingredients Unit to Clariant for $810 Million
Swiss chemicals company Clariant AG will buy a cosmetic ingredients unit of International Flavors & Fragrances Inc. for $810 million.
New York-based IFF said Monday that it would use proceeds from the deal to reduce debt, consistent with previously announced plans to strengthen its capital structure.
A Sweetheart Deal on Car Dealers After Auto Strikes
The United Auto Workers' strikes in Detroit have been costly for automakers. Car dealers barely got a scratch, but their stock prices don't reflect that.
On Wednesday, Ford reached a tentative deal with the union, and Stellantis did so as well on Saturday. Although the UAW has expanded its strike at General Motors, a drawn-out strike now appears less likely.
Americans Can't Stop Spending. Five Reasons Why.
Americans' prolonged spending spree has confounded economists and resulted in a surging U.S. economy. What's keeping their feet off the brakes?
A strong labor market, resilient savings stockpiles and rising values of their homes have consumers feeling good and willing to spend. Despite complaints about high prices, they are taking their children to concerts, packing movie theaters, booking luxury vacations, buying cars and covering the costs of rent and dinners out.
U.S., China Agree in Principle to Biden-Xi Summit
WASHINGTON-China and the U.S. moved closer to holding a summit between President Biden and Chinese leader Xi Jinping after months of careful diplomatic maneuvering to repair ties.
Two days of meetings between Biden, members of his national security team and Chinese Foreign Minister Wang Yi this week yielded "an agreement in principle" for a summit in San Francisco next month, a U.S. official said Saturday. China's Foreign Ministry, in its assessment of Wang's meetings, said, "The two sides agreed to work together to achieve a meeting of the two heads of state in San Francisco."
Israeli Ground Operation Pushes Deeper Into Gaza
Israeli soldiers pushed at least 2 miles deep into the densely populated Gaza Strip Sunday in moves that analysts said seemed designed to trap Hamas in the enclave's north, as the U.S. pressured Israel to restore communications in the territory.
Soldiers and tanks appeared to be taking up positions deep inside Gaza on Sunday, two days after Prime Minister Benjamin Netanyahu said the country was entering a new phase of the war. Tanks fired from Gaza's Mediterranean beaches, and soldiers moved across open and hilly ground, according to video the military released.
(MORE TO FOLLOW) Dow Jones Newswires
10-30-23 0623ET
