Introduction
U.S. stock futures have shown a slight upward trend on Monday, as investors remain hopeful that the Federal Reserve has completed its cycle of interest rate hikes. This positive sentiment continues to buoy the market.
Futures Performance
Here’s how the major stock index futures are performing:
- S&P 500 futures (ES00) rose by 7 points, or 0.2%, reaching 4383.
- Dow Jones Industrial Average futures (YM00) added 35 points, or 0.1%, reaching 34162.
- Nasdaq 100 futures (NQ00) climbed 31 points, or 0.2%, reaching 15210.
Friday’s Recap
On Friday, the Dow Jones Industrial Average (DJIA) increased by 222 points, or 0.66%, closing at 34061. The S&P 500 (SPX) saw a gain of 41 points, or 0.94%, reaching 4358. The Nasdaq Composite (COMP) also experienced an upswing, gaining 184 points, or 1.38%, closing at 13478.
Optimism for Monday
Futures suggest that stocks are likely to continue their recent rally on Monday, although further gains may be modest.
Last week, the S&P 500 recorded an impressive weekly gain of 5.85%, marking its best performance in nearly a year. This surge was fueled by remarks from Federal Reserve Chairman Jay Powell and indications of a cooling labor market. As a result, bond yields plummeted significantly, as expectations grew that the central bank had completed its interest rate hikes for this cycle.
The benchmark 10-year U.S. Treasury yield (BX:TMUBMUSD10Y), which recently reached a 16-year high above 5%, briefly dipped below 4.5% on Friday. However, yields have picked back up to 4.59% at the start of the new week. This increase is somewhat tempering the optimism of equity investors early on Monday.
Bond Market Takes the Lead
The stock market takes a backseat as Treasury bonds drive the financial markets, leaving the S&P 500 trailing behind. Stephen Innes, managing partner at SPI Asset Management, acknowledges the bond market’s dominance and its significant implications for the overall market sentiment.
Crucial Role of Bond Auctions
The sustainability of the recent rebound in bond prices holds immense importance. The outcome of this week’s bond auctions will prove pivotal, while the upcoming Consumer Price Index (CPI) release later in the month can potentially eliminate the possibility of another interest rate hike.
Limited Economic Data
The week kicks off with limited economic data. The Federal Reserve’s senior loan officer survey for October is set for release at 2 p.m. Eastern time. Additionally, Federal Reserve Governor Lisa Cook is expected to deliver a speech at Duke University at 11 a.m.
Earnings Season Updates
While the third-quarter earnings season is underway, the pace has slowed down. After Monday’s closing bell, we can look forward to the earnings release from NXP Semiconductors, Vertex Pharmaceuticals, and Tripadvisor. The highlights for the rest of the week include Uber on Tuesday and Walt Disney on Wednesday.
Positive Earnings Surprises
With 81% of S&P 500 companies having reported their earnings, there have been positive surprises in both earnings per share and revenue. According to John Butters, senior earnings analyst at Factset, 82% of firms exceeded expectations for earnings per share, while 62% posted positive revenue surprises.
