By Stan Choe
US stocks are approaching records ahead of a big week for profit reports from Big Tech stocks. Oil prices, meanwhile, are tumbling toward their worst loss in more than a year.
The S&P 500 was 0.4 per cent higher in afternoon trading. The main measure of the US stock market is coming off its first losing week in the last seven, but it’s still near its all-time high set earlier this month.
Wall Street has made a positive start to its week.Credit: AP
The Dow Jones was up 280 points, or 0.7 per cent, as of 1:10 p.m. Eastern time, while the Nasdaq composite was 0.5 per cent higher and flirting with its own record set in July. The Australian sharemarket is set to rise, with futures at 4.59am AEDT pointing to a rise of 43 points, or 0.5 per cent, at the open. The ASX added 0.1 per cent on Monday.
Boeing launched a nearly $US19 billion ($29 billion) share sale, one of the largest ever by a public company, to address the troubled planemaker’s liquidity needs and stave off a potential credit rating downgrade to junk.
Several Big Tech stocks helped lead the way, and five of the behemoths known as the “Magnificent Seven” are on this week’s schedule to report their latest profits. These high-flying stocks have been at the forefront of Wall Street for years and have grown so big that their movements can singlehandedly shift the S&P 500.
After suffering a summertime swoon on worries that their stock prices had risen too quickly when compared with their profits, Alphabet, Meta Platforms, Microsoft, Apple and Amazon are under pressure to deliver more big growth.
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Another member of the Magnificent Seven, Tesla, soared to one of the best days in its history last week after reporting a better profit than analysts expected.
Monday’s gains for Big Tech helped offset drops for stocks in the oil-and-gas industry, which were hurt by the sinking price of oil. Exxon Mobil’s 0.6 per cent drop and ConocoPhillips’ slide of 1.4 per cent were two of the heaviest weights on the S&P 500.
A barrel of benchmark US crude fell 5.7 per cent, and Brent crude, the international standard, slid 5.7 per cent. It was the first trading for them since Israel attacked Iranian military targets on Saturday, in retaliation for an earlier barrage of ballistic missiles. Israel’s attack was more restrained than some investors had feared it could be, and it raised hopes that a worst-case scenario may be avoided.
Beyond the violence that is taking a human toll, the worry in financial markets is that an escalating war in the Middle East could cut off the flow of crude from Iran, which is a major oil producer. Such worries had sent the price of Brent crude up to nearly $US81 per barrel in early October, despite signals that plenty of oil is available for the global economy. It’s since fallen back below $72.
Financial markets are also dealing with the volatility that typically surrounds a US presidential election, with Election Day fast approaching in two Tuesdays. Markets have historically been shaky heading into an election, only to calm afterward regardless of which party wins.
The trend affects both the stock and the bond markets. In the bond market, Treasury yields were ticking higher to tack more gains onto their sharp rise for the month so far.
The yield on the 10-year Treasury rose to 4.29 per cent from 4.24 per cent late Friday. That’s well above the roughly 3.70 per cent level where it was near the start of October.
Yields have climbed as report after report has shown the US economy remains stronger than expected. That’s good news for Wall Street, because it bolsters hopes the economy can escape from the worst inflation in generations without the painful recession that many had worried was inevitable.
But it’s also forcing traders to ratchet back forecasts for how deeply the Federal Reserve will cut interest rates, now that it’s just as focused on keeping the economy humming as getting inflation lower. With bets diminishing on how much the Fed will ultimately cut rates, Treasury yields have also been given back some of their earlier declines.
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That means the US jobs report on the schedule for Friday could end up being the market’s main event, even bigger than the Big Tech profit reports. Investors want to see more evidence of solid hiring to keep alive the perfect-landing hopes for the economy.
Such data has supplanted inflation reports, which used to be the most important for Wall Street every month but have waned as inflation seems to be heading toward the Fed’s target of 2 per cent.
Yields have also climbed as investors have seen former President Donald Trump’s chances of re-election improving. Economists say a Trump win could help push inflation higher in the long term, and worsening inflation could push the Fed to hike interest rates.
Trump Media & Technology Group, the company that tends to move more with Trump’s re-election odds than on its own profit prospects, jumped 20.3 per cent Monday to $US46.87. The parent company of Trump’s Truth Social platform has been rallying since hitting a bottom of roughly $US12 in late September, though it’s still well below its perch above $US60 reached in March.
Robinhood Markets rose 3.7 per cent after it said it would begin allowing some of its customers to trade contracts based on whether they think either Trump or Vice President Kamala Harris will win the 2024 election.
Delta Air Lines was another winner and rose 3.8 per cent after suing CrowdStrike, claiming the cybersecurity company had cut corners and caused a worldwide technology outage that led to thousands of cancelled flight in July.
In stock markets abroad, Japan’s Nikkei 225 rose 1.8 per cent as the value of the Japanese yen sank after Japanese Prime Minister Shigeru Ishiba’ s ruling coalition lost a majority in the 465-seat lower house in a key parliamentary election Sunday.
Stock indexes were mostly higher across much of the rest of Asia and in Europe.
AP, Bloomberg
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