U.S. stock index futures are suggesting a positive start for Wall Street on Monday, with equities expected to rise following a mixed performance last week.
One driver of early market optimism is a sharp decline in oil prices. December crude oil futures have dropped significantly, plunging $4.36 to $67.42 per barrel. This decrease follows Israel's retaliatory strikes on Iran, which notably spared Iran’s energy infrastructures.
Despite this encouraging start, trading may lack vigor as investors await critical U.S. economic releases scheduled for later in the week. Key reports such as the monthly employment figures, personal income and expenditure data, which encompass the Federal Reserve's favored inflation indicators, will likely dominate attention. Additionally, GDP figures for the third quarter, alongside consumer confidence, pending home sales, and manufacturing activity reports, may draw interest.
The upcoming economic data could potentially influence the economic forecast and adjust market predictions about the pace of interest rate cuts by the Federal Reserve.
In terms of corporate earnings, the spotlight in the coming days will fall on major players like Alphabet (GOOGL), Amazon (AMZN), Exxon Mobil (XOM), Intel (INTC), McDonald's (MCD), Meta Platforms (META), Microsoft (MSFT), and Pfizer (PFE), all scheduled to announce their quarterly results.
Last week, the major U.S. stock indexes displayed contrasting performances. The Nasdaq, known for its technology-heavy listing, extended its gains, while the Dow Jones Industrial Average endured a five-day losing streak. On Friday, the Nasdaq climbed to a record intraday high before closing up 103.12 points, or 0.6 percent, at 18,518.61. Conversely, the Dow dropped 259.96 points, or 0.6 percent, to 42,114.40, retracting significantly from its peak last Friday. The S&P 500 experienced a marginal decline, shedding 1.74 points to 5,808.12.
Throughout the week, the indexes saw varied outcomes. The Dow plummeted by 2.7 percent, the S&P 500 slid by 1.0 percent, while the Nasdaq inched up by 0.2 percent.
The session started strong on economic optimism, buoyed by the University of Michigan’s revised report, showing an unexpected improvement in consumer sentiment in October. Their consumer sentiment index was adjusted upward to 70.5 from 68.9, surpassing economists' expectations of 69.0 and slightly exceeding September’s final reading of 70.1. This marks the index’s third consecutive monthly rise, reaching its best level since April’s 77.2.
However, buying enthusiasm dwindled amid climbing treasury yields, reviving worries that the Federal Reserve might slow its anticipated interest rate reductions. The central bank is still broadly projected to cut rates by a quarter point next month, yet the CME Group's FedWatch Tool suggests a 24.0 percent chance rates will remain steady in December.
The Dow's losses were exacerbated by significant dips in McDonald's (MCD), Dow Inc. (DOW), and Travelers (TRV) stocks.
Meanwhile, airline stocks rebounded notably after a downward trend on Thursday, evidenced by the NYSE Arca Airline Index’s 2.0 percent surge. Oil service stocks also saw robust gains, reflected in the Philadelphia Oil Service Index’s 1.3 percent increase, bolstered by a sharp rise in crude oil prices. In contrast, despite a slight uptick in gold prices, gold stocks faced pressure, leading to a 2.1 percent drop in the NYSE Arca Gold Bugs Index. Sectors sensitive to interest rates, particularly utilities and housing, experienced notable weakness amid ongoing rate concerns.
**Commodity and Currency Markets**
Crude oil futures have tumbled $4.36 to $67.42 a barrel following a $1.59 increase to $71.78 last Friday. Meanwhile, gold futures have decreased by $9.90 to $2,744.70 an ounce after gaining $5.70 to $2,754.60 in the prior session.
In the currency markets, the U.S. dollar is trading at 152.58 yen, up from 152.31 yen in New York's last trading session on Friday. Against the euro, the dollar is now at $1.0818, compared to $1.0796 last Friday.Asian equity markets experienced a broad upswing on Monday, prominently led by Japan. The advances followed the weekend's electoral results, where Japan's Liberal Democratic Party lost its parliamentary majority in the lower house, causing the yen to weaken to a three-month low and subsequently benefitting shares tied to exports.
In parallel, the dollar appreciated while gold showed a slight decline amid global uncertainties and in anticipation of critical upcoming data from the United States, including figures on inflation, GDP, and the labor market.
Oil prices saw a reduction of over 4 percent during Asian trading post-Israel's weekend assault on Iran. The attack strategically avoided oil and nuclear infrastructures, with Iran hinting at a restrained response.
The Shanghai Composite Index in China rose by 0.7 percent, reaching 3,322.20, as market watchers awaited essential economic activity reports expected later in the week. Investors appeared unfazed by reports indicating a swift decline in China’s industrial profits for September—the fastest since the pandemic's onset.
Hong Kong's Hang Seng Index managed a slight gain, concluding at 20,599.36, despite a session marked by volatility.
In Japan, a weakened yen propelled gains, particularly among exporters such as Honda Motor, Toyota, Sony, and Nintendo, which saw rises between 2 and 4 percent. Consequently, the Nikkei 225 Index surged 1.8 percent to finish at 38,605.53, owing to the political outcome being largely anticipated by the markets, while the broader Topix Index closed 1.5 percent higher at 2,657.78.
South Korean shares rallied primarily due to the technology sector's strength, with Samsung Electronics climbing 3.9 percent. Korea Zinc posted a 3.8 percent increase following its announcement of a $1.5 billion share buyback, amounting to 9.85 percent of the company's shares. The Kospi ended the day 1.1 percent higher at 2,612.43.
In Australia, the market ended slightly up as the financial sector's underperformance offset gains in mining, driven by surging iron ore prices. The S&P/ASX 200 Index ticked up 0.1 percent to 8,221.50 in anticipation of forthcoming domestic inflation data, while the All Ordinaries Index also rose by 0.1 percent to 8,478.20.
New Zealand's markets remained closed in observance of the Labour Day holiday.
**Europe**
European stocks presented a mixed picture on Monday amid a packed week of earnings reports and economic data announcements. The Eurozone is set to release initial GDP, consumer confidence, and economic sentiment data on Wednesday, which investors will analyze for indications concerning future European Central Bank interest rate decisions.
Eurozone bond yields increased, while the British pound remained relatively stable before British Prime Minister Sir Keir Starmer's new government reveals its inaugural budget on Wednesday, alongside the anticipated release of the U.S. monthly jobs report on Friday.
Ahead of the UK Budget, a survey highlighted a drop in UK business confidence to a four-month low in October.
France's CAC 40 Index saw a nominal increase of 0.1 percent, whereas Germany's DAX Index fell by 0.3 percent, along with the UK's FTSE 100 Index, which decreased by 0.5 percent.
Energy stocks faced downward pressure, with BP Plc and Shell recording notable losses as crude oil prices plummeted to a four-week low amidst diminishing concerns of a Middle East conflict.
Investors felt reassured with Israel's strikes having spared Iran's oil installations during the weekend attacks.
Philips suffered declines following a downgrade of its annual sales forecast, attributing it to decreasing demand from Chinese consumers and hospitals. Telecommunications firm KPN also experienced a substantial downturn despite reaffirming its full-year 2024 forecast.
Conversely, Eurofins Scientific SE saw a surge after the company, specializing in bio-analytical testing, announced an agreement with Synlab to acquire its clinical diagnostics operations in Spain, though the transaction amount was not disclosed.
**U.S. Economic Update**
At 11:30 am ET, the Treasury Department is set to release the results of this month’s auction of $69 billion in two-year notes. Additionally, at 1 pm ET, results for the auction of $70 billion in five-year notes are expected to be published.
