Here are five things you must know for Monday, October 10:
1. — Stock Futures Mixed As October Rally Faces Inflation Test
U.S. equity futures edged lower Monday, while the dollar consolidated gains against its global peers, as investors extended their retreat from risk markets following an escalation of military action in the Ukraine and ahead of a the unofficial start to the third quarter earnings season later this week.
Reports from Kyiv suggest Russia bombs targeted both the Ukrainian capital as well as energy installations in cities around the country Monday in an apparent retaliation for the destruction of a key bridge linking Crimea to the mainland.
The attacks on Kyiv, the most significant in several weeks, rattled global markets and pushed investors into the arms of the safe-haven U.S. dollar, which rose 0.4% against its global peers to change hands at 113.321 in overnight trading.
The dollar index, which tracks the greenback against a basket of six global currencies, was also elevated by last week’s stronger-than-expected September payroll report, which showed U.S. employers added 263,000 new jobs last month, pulling the headline unemployment rate to 3.5% and cementing the case for another larger rate hike from the Federal Reserve next month.
The CME Group’s FedWatch, in fact, pegs the chances of a fourth consecutive 75 basis point rate hike at just under 80%, with the bulk of betting pointing to a Fed Funds rate of between 4.5% and 4.75% by the end of the year.
That escalation clipped a short-lived rally on Wall Street last week, and looks to hang over stocks at the start of trading on Monday, as well, as investors look ahead to a busy week for economic data and earnings releases, as well as minutes from the Fed’s September meeting on Wednesday.
The S&P 500, however, is still up 1.51% for the month, despite Friday’s sell-off, although that compares to a 23.6% decline for the year, one of the worst performances for the main U.S. benchmark in at least two decades.
Futures tied to the S&P 500 are indicating a 7 point opening bell decline, while those linked to the Dow Jones Industrial Average, which is up 2% for the month, are priced for a 15 point pullback. Contracts tied to the tech-focused Nasdaq are indicating a 40 point decline.
Overnight in Asia, China markets re-opened following that nation’s traditional October holiday week, with tech stocks leading indices sharply lower following a move by the Biden administration to tighten rules on semiconductor technology exports.
The region-wide MSCI ex-Japan benchmark fell 1.95% into the final hours of trading, while the Nikkei 225 in Tokyo was marked 0.71% lower following Friday’s close on Wall Street.
In Europe, the region-wide Stoxx 500 index was down % 0.63%, with Britain’s FTSE 100 down 0.77% following a step-up in bond buying from the Bank of England as the pound drifted to 1.10 against the U.S. dollar.
2. — Week Ahead: Earnings, Inflation and Fed Minutes In Focus
Inflation and earnings will likely dictate market direction later this week as investors look for any suggestion of a slowdown in consumer price pressures and their impact on corporate profits heading into the final months of the year.
Thursday’s September inflation reading, slated for 8:30 am Eastern time, is expected to show a moderation in the headline rate but another modest acceleration in core consumer price pressures, a mix that is likely to do little to change the Fed’s rate hike path nor its determination to keep the elevated well into the coming year.
The data will follow minutes of the Fed’s October meeting, which will be released on Wednesday afternoon, and the unofficial start of the third quarter earnings season on Friday, with September quarter updates from JPMorgan Chase (JPM) , Citigroup (C) , Wells Fargo (WFC) and Morgan Stanley (MS) .
Collective S&P 500 profits are expected to rise 4.1% from last year to $463.9 billion, according to data from Refinitiv, lead by gains from both the energy and industrials sectors.
3. — Tesla Sees Record September China Sales After Shanghai Re-Boot
Tesla (TSLA) shares moved lower in pre-market trading, tracking declines in the tech sector, following data from China showing record September sales.
The China Passenger Car Association (CPAC) said Tesla delivered 83,155 cars last month, an 8% increase from August that crushed the group’s previous best of just under 79,000 recorded in June.
Tesla, which re-started its Shanghai giga factory following scheduled maintenance in July, reported global deliveries last week of 343,830 units for the three months ending in September, another company record.
The group will post third quarter earnings on October 19.
Tesla shares were marked 1.54% lower in pre-market trading to indicate an opening bell price of $219.63 each.
4. — Ford, GM Shares Slump After UBS Downgrade
Ford Motor (F) shares slumped lower in pre-market trading after analysts at UBS lowered their rating and price target on the carmaker
UBS analyst Patrick Hummel cut his rating on the stock to ‘sell’, from ‘neutral’, and took $3 off his price target to a new level of $10 per share ahead of the group’s third quarter earnings later this month,
Hummel also cut his rating on General Motors (GM) to ‘sell’ from ‘neutral’, citing the risk that profits could “more than halve” next year amid rapidly accelerating demand destruction. His new GM price target was set at $38 per share, down $18 from his prior estimate.
Ford shares were marked 4.1% lower in pre-market trading to indicate an opening bell price of $11.70 each. General Motors shares, meanwhile, fell 3.03% to $32.60 each.
5. — Twitter Shares Move Closer to Musk Takeover Price of $54.20
Twitter (TWTR) shares bumped higher in pre-market trading as investors push the stock closer to the $54.20 level at which billionaire Tesla CEO Elon Musk looks set to purchase the social media group later this month.
Musk, who first proposed buy Twitter for $44 billion earlier this spring, before quickly retreating from his pledge amid accusations that Twitter executives were hiding the number of fake accounts on its platform, was given until October 28 to close the deal by Delaware Chancery Court Judge Kathaleen McCormick late last week.
Failing that, Judge McCormick said, a trial will likely take place in November, during which Twitter will attempt to compel Musk to complete their merger agreement.
Questions remain, however, over the nature of the funding required to reach the $44 billion price tag, with banks on the hook for around $12.5 billion in loans and Musk himself having raised around $15.4 billion from the sale of Tesla shares.
Twitter shares were marked 1.5% higher in pre-market trading to indicate an opening bell price of $49.92 each.