Five things to know before the market opens on Monday, November 7:
1. — Equity futures edge higher with Fed track, intermediates in focus
US stock futures rose on Monday while the dollar fell against global peers and Treasury yields declined as investors eyed another key week for domestic markets amid questions about the Federal Reservethe appetite for prolonged rate increases.
Modestly easing wage pressures in last week’s October jobs report, coupled with the Fed’s seemingly dovish statement following its fourth 75 base point rate hike last week has given rise to at least some suggestions that the Fed will start to slow the pace of its planned rate hikes starting next month.
Fed Chairman Powell did his best to rein in those expectations last week, however he insisted it was “premature” to talk about a change in tact, but as traders noted the stark difference in his comments from the agreed statement, markets are likely to focus on the seven Fed officials scheduled to give public speeches this week to clarify the central bank’s messages.
The need for clarity is even more important now that the third-quarter earnings season is drawing to a close, and investors are increasingly concerned about the market’s ability to sustain its brief October rally into the final months of the year.
Bank of America’s closely watched ‘Flow Show’ report suggests fund managers are moving into cash at the fastest pace since the pandemic, with an inflow of $62.1bn last week, while Refinitv data suggests fourth-quarter earnings will likely decline by 0.4% from a year ago. at a weighted share of $459.6 billion.
With just over 85% of the S&P 500 In the October quarter reports, earnings are likely to grow 4.3% from a year ago to $464.1 billion, but if you strip out the energy sector, that rate drops to -3.4%.
Meanwhile, China’s decision to double down on its ‘zero Covid’ health policies continues to affect both the region’s broader economy and the supply chains that bring products to the United States. Indeed, China last month posted the first simultaneous drop in both exports and imports in more than two years, while Apple AAPL warned that restrictions at a key factory in Zhengzhou would hit high-end iPhone shipments during the year. holiday quarter.
Heading into the start of the trading day on Wall Street, futures contracts linked to the S&P 500 are priced at an opening bell gain of 8 points, while those linked to the Dow Jones Industrial Average are priced at an increase of 88 points. The tech-focused Nasdaq is priced at a modest 11-point advance.
The US Dollar Index, which tracks the greenback against a basket of its global peers, was down 0.35% at 110.515, while the benchmark 10-year note yield fell to 4.171%.
In overseas markets, Chinese stocks posted modest gains on the hope that weakening trade data will prompt a political response from Beijing, with the MSCI ex-Japan index of the entire region rising 1.78% before the close. of the negotiation.
In Europe, the Stoxx 600 gained 0.89%, while Britain’s FTSE 100 was down 0.04% at the opening hours of London trading.
2. — Week Ahead: Earnings, Election and Inflation Information Available
midterm elections and inflation data will be the focus of market direction this week as investors continue to look for clues as to when, or even how, the Federal Reserve will wrap up its relentless series of rate hikes.
Polls suggest the growing possibility of a Republican victory in both the House and Senate on Tuesday, with key elections in Georgia that could allow the GOP to retain control of the upper house for a fourth straight Congress. That composition would likely thwart any fiscal agenda put forth by President Joe Biden during his last two years in office and possibly remove a key market risk that more fiscal spending by Democrats would further accelerate inflationary pressures.
On that front, key CPI Data for October, to be released at 8:30 a.m. Thursday, is likely to show at least a modest decline in headline inflation on an annual basis, though higher gasoline prices will push the monthly reading to 0. 7%. Large drops in used car prices will reduce the main component to around 0.5%, according to forecasts.
A relatively quiet week on the earnings front will see 31 S&P 500 companies reporting September quarter updates, highlighted by Disney (DIS) and Occidental Petroleum (OXY) Tuesday and Wynn Resorts (WYNN) on Wednesday. Video game creators Activision (ATVI) and Interactive Take-Two (TWO) report on Monday and Friday respectively.
3. — Apple Slide Send Warning on iPhone
Apple (AAPL) Shares fell in premarket trading after the iPhone maker warned that Covid restrictions at a key plant in China would cut shipments of its high-end phones ahead of the holiday season.
Apple said the 200,000-person factory in Zhengzhou, run by iPhone assembler Foxconn, is “currently operating at significantly reduced capacity” due to Covid restrictions put in place last week by officials in Beijing.
Foxconn said at the time that it would keep the plant running as part of a “closed-loop” strategy, in which workers remain at the facility until a shutdown order expires, but that it could struggle to maintain production levels. as workers left the complex earlier this week in advance of stay-at-home orders.
“We continue to see strong demand for the iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated and customers will experience longer wait times for iPhone 14 Pro and iPhone 14 Pro Max. receive your new products,” the company said in a statement late Sunday.
Apple shares were marked 1.05% lower in premarket trading to indicate an opening price of $136.93 each.
4. — Activision downgrades amid doubts over Microsoft acquisition
Activision Blizzard (ATVI) Shares were lower in premarket trading ahead of the video game maker’s third-quarter earnings after the closing bell and reports suggesting its $69 billion acquisition by Microsoft. (MSFT) could be at risk.
The New York Post reported Sunday that some investors are concerned that Microsoft’s efforts to gain regulatory approval for the deal, which was first disclosed earlier this year, have fallen short of Activision’s expectations.
At stake is the future of Call of Duty, the group’s most valuable gaming franchise, which is currently available on Sony’s PlayStation console. For Microsoft’s deal to work, the Post reported, it would likely have to keep the game exclusively on its XBox platform, but that would limit customer choice and likely raise prices, pushing regulators in the UK, the Union European and the United States. – all of whom are investigating the deal – to reject it or seek promises that the games will be available for free.
Meanwhile, Activision, which also makes World of Warcraft, Candy Crush and Diablo, is likely to report a 10% year-over-year decline in quarterly revenue for the three months ending in September, with a bottom line of 50 cents a share.
Activision shares were down 0.8% in premarket trading to signal an opening bell price of $71.39 each, a level that would put them 24% below Microsoft’s proposed acquisition price. $95 per share.
5. — Buffett deals propel Berkshire Hathaway to strong third-quarter profit
Berkshire Hathaway (BRK.B) Shares rose in premarket trading on Monday after the investment vehicle controlled by billionaire investor Warren Buffett posted solid gains for its underlying businesses but had a $2.69 billion net loss linked to falling prices. of stocks, insurance losses and rising inflation.
Berkshire Hathaway, which has been led by the 92-year-old Buffett since 1965, posted a 20% rise in operating profit, the metric he most favors, for the three months ending in September, thanks in part to gains in the railway sector. , utilities and energy companies.
However, costs related to Hurricane Ian, as well as a broader weakness in the auto insurance market, hit Buffett’s Geico division, which posted a $759 million pre-tax loss, while its other underwriters insurance companies lost $962 million.
Buffett and his team bought $3.7 billion worth of net shares during the third quarter, including his largest stake in Occidental Petroleum, and bought back about $1.05 billion of Berkshire stock.
“While customer demand for products and services was relatively good in 2022, demand began to weaken in the third quarter in some of our businesses,” Berkshire said in its quarterly SEC filing. “We continue to experience the negative effects of higher costs for materials, freight, labor and other inputs.”
Berkshire Hathaway’s class B shares ticked up 1.54% in premarket trading to indicate an opening bell price of $291.90 each.