MARKET WRAPS
Watch For:
NFIB Index of Small Business Optimism for September; Wholesale Trade for August; Fedspeak from Neel Kashkari, Mary Daly, Christopher Waller; Earnings from PepsiCo
Today's Top Headlines/Must Reads:
- Bond Yields Fall After Attack on Israel
- Oil Prices Fall Back. Supply Fears Remain Amid Israel-Hamas War.
- China's Country Garden Succumbs to Debt Crisis After Sales Plunge
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Opening Call:
Stock futures rose early on Tuesday as anxiety over violence in the Middle East was counteracted by comments from Federal Reserve officials suggesting a recent tightening of credit conditions reduced the need for another rate hike.
"Even with the evolving situation in the Middle East, investors remained focused on the Fed's current thinking on interest rates and the need to contain inflation," Interactive Investor said.
Benchmark 10-year notes were down around 15 basis points following comments on Monday from the Fed's Lorie Logan, who said that rising bond yields could do "some of the work of cooling the economy for us, leaving less need for additional monetary policy tightening."
Traders on Tuesday were pricing in an 88% chance that the Fed will leave rates unchanged after its November meeting, while the chances of a 25 basis point hike in December fell to 28%, down from 40% just a week ago.
But there is plenty of economic data and Fed chatter to digest before then. Particularly important will be the producer and consumer inflation numbers for September, released on Wednesday and Thursday respectively.
Premarket Movers
Lockheed Martin was up 0.6% in premarket trading. Northrop Grumman rose 1%.
PagerDuty declined 6.2% after announcing it planned to offer $350 million of convertible senior notes.
Unity Software rose 6.7% in premarket trading after the announcement that John Riccitiello would be retiring as president, chief executive and chairman.
Topline results released by Ventyx Biosciences from its trial of VTX002 in patients with moderate-to-severely active ulcerative colitis were at the lower end of company guidance and the stock sank 21% premarket.
Monday's Post-Close Movers
Immunic received positive interim data from a Phase 2 trial evaluating a treatment for progressive multiple sclerosis. Shares rose 49%.
Lexicon Pharmaceuticals secured preferred formulary status for Inpefa, its heart failure treatment, with Express Scripts for Medicare patients beginning on Nov. 1. The drug was approved by the FDA in May. Shares rose 15%.
Forex:
Upcoming speeches by Fed officials on Tuesday could influence the dollar "in one way or the other," Swissquote Bank said.
Fed officials' comments on Monday helped temper the dollar's rise following Hamas' attacks on Israel.
Energy:
Oil futures were lower in a likely technical correction after settling more than 4% higher on Monday on worries over the situation in Israel and Palestine.
Oil, in particular, rose amid worries of possible sanction tightening on Iran--something which could limit supply.
"The issue for the U.S. government is that they are clearly worried about rising energy prices and one would expect that strictly enforcing these sanctions would provide more support to oil prices," ING said.
Read Natural Gas Continues Rise Over Israel Supply Worries
Metals:
Base metals prices pulled back as weak demand and dollar strength pressured industrial goods, while gold remained in demand for its safe-haven appeal.
Talks at the London Metals Week were dominated by trading losses this year, as well as weak demand signals in the near term from the Chinese property sector.
"We expect copper will go down over 6-12 months, reading toward $7,000 to $7,500 mark," Citi said.
Wood Mackenzie said the outlook for iron ore hinges on how China navigates its objectives for limiting steel production this year and the magnitude of stimulus measures implemented by the government there,
It recently upgraded its iron-ore price forecasts, including lifting its 2024 forecast to $108/metric ton from $100.
Read Iron-Ore Outlook Hinges on China Steel Curbs, Stimulus
TODAY'S TOP HEADLINES
Huawei Supplier Stocks Jump on Robust Product Demand
Robust demand for Huawei products is fueling investor interest in the shares of its suppliers, which have bucked declines in the broader mainland Chinese equities market.
Expectations that the Chinese technology company may continue to see strong sales for recently launched products are sending stocks of some of Huawei's suppliers to record highs.
Why Nelson Peltz Grew Impatient With Disney's Turnaround Efforts
Nelson Peltz said his proxy fight against Disney was over in February, but Bob Iger knew the activist investor might return.
Peltz and the Disney CEO remained in direct contact this year, and Iger sought to reassure him that Disney's $5.5 billion in budget cuts and elimination of 7,000 jobs were progressing quickly, according to people familiar with the matter.
IMF says the global economy is limping along
The International Monetary Fund on Tuesday kept its forecasts for limp economic growth this year and next largely unchanged.
The IMF forecast global growth of 3% for 2023 and 2.9% growth next year, a downward cut for 2024 of one-tenth. Global GDP growth was 3.5% in 2022.
Why the Israel-Hamas War Matters for Investors
Markets on Monday morning reacted perfectly logically to the most serious attack on Israel in 50 years and the deaths of more than 1,000 Israelis and Palestinians. Oil prices initially rose 3% or so, stock futures fell a bit, gold was up about 1% and Treasury futures rose, lowering yields.
When it comes to the bottom line, even disaster for millions of people doesn't much matter, and moves in both stocks and Treasurys were smaller than after Friday's jobs report. It is a brutal truth: The carnage turned out to be less important for markets than a single set of data from the Bureau of Labor Statistics.
Israel Goes on Offensive Against Hamas as U.S. Warns Hezbollah Not to Engage
ALONG THE ISRAEL-GAZA BORDER-Israel prepared for what could be an extended ground assault in the Gaza Strip, and the Pentagon warned Iran and the Lebanese militant group Hezbollah to "think twice" before joining the conflict and said it was prepared to come to Israel's defense.
Dozens of tanks and hundreds of Israeli soldiers fanned out along the Gaza Strip border Monday, while Hamas threatened to execute Israeli hostages it seized some 48 hours earlier during a devastating invasion.
Biden Interviewed by Special Counsel Regarding Classified Documents
WASHINGTON-President Biden has been interviewed by the special counsel probing why classified documents ended up at his home and an office he once used, the White House said Monday, a sign the investigation is entering its late stages as the 2024 presidential campaign heats up.
"The voluntary interview was conducted at the White House over two days, Sunday and Monday, and concluded Monday," White House spokesman Ian Sams said in a statement.
House Republicans Air Grievances Headed Into Speaker Vote
WASHINGTON-House Republicans struggled to find unity on a path to electing a new speaker, as members vented their frustrations over the party's disarray ahead of a planned conference vote later this week.
Roughly 150 lawmakers met behind closed doors on Monday night, kicking off what they hope will be a quick process to find a successor to Kevin McCarthy (R., Calif.), ousted last week by eight rebel Republicans who voted with Democrats.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
None scheduled
Economic Calendar:
None scheduled
Other News:
A consortium led by Brookfield Asset Management secured approval of Australia's anti-trust regulator to buy Origin Energy for roughly $10 billion, as its pledge to spend big on renewable energy generation trumped competition concerns.
Read Australia's Competition Regulator Approves Origin Takeover by Brookfield, EIG
Canadian auto workers went on strike against General Motors after the carmaker failed to reach a temporary agreement ahead of an 11:59 p.m. E.T. Monday contract deadline. The walkout by about 4,300 members of Canada's Unifor union ratchets up pressure on GM as it copes with a continuing strike in the U.S. Work is paused at two GM assembly plants and more than a dozen parts-distribution centers as a United Auto Workers strike drags into its fourth week.
Read Canadian Auto Workers Go on Strike Against General Motors
Expected Major Events for Tuesday
04:30/JPN: Sep Corporate Insolvencies
05:00/JPN: Sep Economy Watchers Survey
08:00/ITA: Aug Industrial Production
10:00/US: Sep NFIB Index of Small Business Optimism
12:55/US: 10/07 Johnson Redbook Retail Sales Index
14:00/US: Aug Monthly Wholesale Trade
23:01/UK: Sep KPMG and REC UK Report on Jobs
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Tuesday
AZZ Inc (AZZ) is expected to report $0.95 for 2Q.
Absolute Software (ABST.T) is expected to report $0.05 for 4Q.
Amyris Inc (AMRSQ) is expected to report $-0.31 for 2Q.
E2open Parent Holdings Inc (ETWO) is expected to report for 2Q.
Escalon Medical (ESMC) is expected to report for 4Q.
Friedman Industries (FRD) is expected to report for 1Q.
Neogen Corp (NEOG) is expected to report $0.03 for 1Q.
PepsiCo Inc (PEP) is expected to report $2.14 for 3Q.
Presto Automation Inc (PRST) is expected to report for 4Q.
Surgalign Holdings Inc (SRGAQ) is expected to report for 2Q.
TSR Inc (TSRI) is expected to report for 1Q.
VOXX International Corp - Class A (VOXX) is expected to report $-0.38 for 2Q.
ViewRay Inc (VRAYQ) is expected to report $-0.23 for 2Q.
Vintage Wine Estates Inc (VWE) is expected to report for 4Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
AeroVironment Cut to Outperform From Strong Buy by Raymond James
(MORE TO FOLLOW) Dow Jones Newswires
10-10-23 0602ET
