Five things you need to know before the market opens on Monday, October 31:
1. -- Stock Futures Lower, Treasury Yields Jump
U.S. equity futures moved lower Monday, while the dollar retrenched against its global peers amid a jump in Treasury bond yields, as investors adopted a cautious tone heading into a crucial ten-day stretch for global markets.
Wall Street's sharp rally on Friday, paced by the best single-day gain for Apple (AAPL) shares in more than two years, lifted all three indices by around 2.5% and put the Dow on pace for its best monthly gain since 1976. Fading bets on another big rate hike from the Federal Reserve in December, following softer-than-expected inflation data Friday, added to the optimism, as did broad-based gains for S&P 500 earnings reports that offset the impact of weaker-than-expected Big Tech updates from Amazon, Microsoft and Google earlier in the week.
Markets now face a crucial run of key data points, including Wednesday's Fed rate decision, a Thursday policy meeting at the Bank of England, Friday's October jobs report and next Tuesday's mid-term elections, that will test the resilience of the market's recent rally.
With the Fed meeting up first, the CME Group's FedWatch has the chances of a 75 basis point rate hike pegged at 88.2%, but the chances of a follow-on move in December have fallen to around 46.6%. Still, benchmark 10-year note yields were marked 6 basis points higher in overnight trading at 4.052%, with 2-year notes rising to 4.474%, suggesting traders aren't yet convinced of a Fed pullback heading into Chairman Jerome Powell's press conference on Wednesday afternoon.
In the meantime, another busy week of earnings data will occupy investors' attention, as collective S&P 500 profit are expected to rise 3.1% from last year to $458.9 billion. Stripping away massive gains from the energy sector, however, and earnings are forecast to decline by 0.4%, with only a very modest gain expected over the three months ending in December.
That puts a great deal of emphasis on both Wednesday's Fed decision, as well as the Friday payroll data, as markets look to defend gains built into the start of the final trading quarter of the year.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are priced for a 22 point pullback while those linked to the Dow Jones Industrial Average are priced for a 155 point decline. The tech-focused Nasdaq is priced for an 88 point retreat.
In overseas markets, the region-wide Stoxx 600 was down 0.3% in early Frankfurt trading ahead of October inflation data at 6:00 am EST time, while London's FTSE 100 slipped 0.04%.
Overnight in Asia, stocks were able to rise modestly despite another grim set of data from China, which showed factory activity contracting over the month of October, paired by a pullback in its services sector as well, amid Beijing's ongoing Covid crackdown.
The region-wide MSCI ex-Japan index was marked 0.18% higher heading into the close of trading, while Japan's Nikkei 225 rose 1.748% to a six-week high of 27,587.46 points amid a solid rally for tech stock's following Friday's gains on Wall Street.
2. -- Week Ahead: Earnings, Fed, Jobs Data In Focus
The busiest week of the third quarter earnings season, a crucial Fed rate decision and last month's jobs data will highlight a testing week for the market's recent rally as the Dow looks to close out its best run of October gains since the mid 1970s.
The Fed will unveil its November rate decision at 2:00 pm Eastern time Wednesday, with the closely-watch press conference from Chairman Jerome Powell slated to being thirty minutes later. With bets on a 75 basis point hike largely locked-in, investors will be seeking clues as to whether a softening in inflation pressures will allow the Fed to alter the speed and depth of its next rate moves heading into December and the first quarter of next year.
In terms of earnings, around 163 S&P 500 companies will report third quarter earnings this week, highlighted by updates from Pfizer (PFE), CVS Health (CVS), Advanced Micro Devices (AMD) and Starbucks (SBUX).
Around 75% of the 99 companies reporting so far have topped earnings forecasts, according to Refinitiv data, just shy of of the four-quarter average of around 78.1%.
Friday's payroll data, due at 8:30 am Eastern time, is expected to show that American employers added 190,000 new jobs last month, while the headline unemployment nudged 0.1% higher to 3.6%, Average hourly earnings are likely to have risen around 0.3% from the previous month, matching the September increase, but easing to around 4.7% on the year.
3. -- Brazil Elects Lula In Narrow Presidential Runoff
Luiz Inacio Lula da Silva, the former Brazilian leader known as Lula, won the country's runoff Presidential election Sunday with a narrow victory over far-right incumbent Jair Bolsonaro.
Lula, who served as President between 2003 and 2010, won Sunday's election with 50.9% of the vote, topping the 49.1% gathered by Bolsonaro, although the incumbent has yet to concede victory to his leftist rival. President Joe Biden, however, congratulated Lula, calling Brazil's decision the result of "free, fair and credible elections".
Lula, 77, is expected to take office on January 1, and set about implementing a more socialist agenda on the region's largest economy, including a more active role in Petrobras, the state-backed oil and energy giant.
The Brazilian real was marked 1% higher against the U.S. dollar in overnight trading at 5.2950 with focus now shifting to the opening of the benchmark Bovespa, which has gained around 14.8% so far this year.
4. -- Apple Shares Slip On China iPhone Output Concerns
Apple shares slipped lower in pre-market trading amid concerns that iPhone output from a key factory in China could be curtailed by Beijing's strict 'zero Covid' health policies.
Foxconn, a key Apple assembler responsible for around 70% of the tech giant's iPhone shipments, said Sunday it is working towards establishing back-up production facilities to compensate for lost output in Zhengzhou, a 200,000-person factory caught in the throes of that city's recent Covid restrictions.
Reuters reported Monday that November production in Zhengzhou could fall by as much as 30%, with plans for a boost in output in Foxconn's Shenzen factory now underway.
Apple CEO Tim Cook said last week that iPhone demand has remained healthy, but noted that supply constraints for both the 14 Pro and the 14 Pro Max continued to persist heading into the key holiday season.
Apple shares, which has their best single-day session in more than two years Friday, surging more than 7.5%, were marked 0.76% lower in pre-market trading to indicate an opening bell price of $154.56 each.
5. -- Elon Musk Sets Out Twitter Ambitions, Courts Controversy
Elon Musk set out a series of objectives for his ownership of Twitter over the weekend, while raising concern for the microblogging website's expected change in content rules by sharing a baseless conspiracy theory linked to the attack on House Speaker Nancy Pelosi's husband, Paul Pelosi.
Musk, who closed his $44 billion purchase of Twitter on Friday, said late Sunday that he will unveil new rules on account verification in the coming days, following reports he plans to charge $4.99 for users to keep their 'blue check'. He also polled Twitter uses on the return of Vine, a short-form video sharing format that was a precursor to TikTok.
Musk's sharing of a report on the attack on Speaker Pelosi's husband -- a post he eventually deleted -- along with plans to cull thousands of staff at the group's San Francisco headquarters, has increased concerns for an increase in hate speech on the platform and the prospect of attracting key advertisers.
General Motors GM said it would temporarily halt ad spending on Twitter while it "enages to understand the direction of the platform under their new ownership."
