Following a brutal sell-off, US equities rebounded on Monday as investors anticipated a busy week of events, including the Federal Reserve’s most recent policy decision and Apple’s (AAPL) results.
At the closing bell, the benchmark S&P 500 (^GSPC) increased 1.2%, officially entering correction territory. Meanwhile, the Dow Jones Industrial Average (^DJI) gained almost 500 points, or around 1.6%, after ending down 1.2%.
The tech-heavy Nasdaq Composite (^IXIC) ended the day with a 1.2% gain after a dismal week fueled by inconsistent Big Tech earnings announcements.
After a difficult few months for the stock market, all eyes are now on the US central bank and Apple, the largest firm on the S&P 500. Due on Friday, the US jobs data for October will also be carefully followed.
Expectations that policymakers would maintain their “higher for longer” approach and leave interest rates unchanged in their decision on Wednesday have increased due to a spike in the Fed’s favoured inflation indicator.
After the market closes on Thursday, Apple is scheduled to reveal its quarterly results. The company will be focusing on any effects from China’s recent efforts to restrict the use of iPhones.
Investors are analysing McDonald’s earnings release on Monday in light of the US consumer’s resilience in the face of rising borrowing costs. The massive burger chain outperformed third-quarter earnings forecasts thanks to increasing menu pricing that spurred sales growth.
Benchmark oil prices dropped in the commodities market as investors returned to the markets after Israel’s methodical launch of its assault in Gaza allayed worries that the conflict would spread throughout the Middle East. Brent futures (BZ=F) fell almost 3% to trade at approximately $87.84 a barrel, while West Texas Intermediate futures (CL=F) dropped about 3.6% to hit $82.50 a barrel.
Wall Street welcomed optimism on Monday, pushing up all three main indexes while investors await the Federal Reserve’s crucial interest rate decision on Wednesday.
While the Dow Jones Industrial Average (^DJI) gained more than 500 points or almost 1.6%, the S&P 500 (^GSPC) advanced by 1.2%.Roughly 1.2% was gained by the tech-heavy Nasdaq Composite (^IXIC).
Tuesday marks the start of the Federal Reserve’s two-day policy meeting, which will culminate with the decision to maintain interest rates, as most observers predict. The CME FedWatch Tool indicates that while a raise in December might follow the pause at the November Fed meeting, there is a 75% chance that the Fed will end its rate-hiking campaign this year.
The sharp increase in Treasury yields has been cited by a number of analysts, including Fed officials, as another justification for holding rates constant at the November policy meeting. The benchmark 10-year Treasury’s yield has risen, making borrowing more expensive for both individuals and companies. This has exerted further downward pressure on the economy and essentially acted as a separate rate hike.
According to Greg McBride, chief financial analyst at Bankrate, “the surge in long-term interest rates since the beginning of August is doing a lot of the dirty work for the Federal Reserve.” “Rising bond yields and mortgage rates have further tightened monetary policy on their own, so the Fed won’t be forced to raise interest rates at this meeting.”
President Joe Biden is seeking to establish new guidelines for artificial intelligence (AI) by addressing privacy and security issues that have surrounded the quickly evolving technology in a new executive order that was released on Monday. AI’s ability to upend a number of economic sectors has garnered a lot of attention. Leaders in the industry believe AI will define a new age of technology, and several of the biggest and most powerful tech businesses in the nation have invested heavily in accelerating their AI programmes.
Before releasing their AI models to the general public, tech companies are required under the presidential order to assess them and subject them to safety testing that will be shared with the US government.
Another goal of the order is to shield Americans against fraud and false information produced by AI. As part of the initiative, Federal agencies will be able to employ technologies to make it easier for people to determine if material and communications from their government are real. The Commerce department will establish guidelines to authenticate AI-generated content. According to the president’s directive, when AI-generated material becomes more prevalent in media and public conversation, this provision will serve as a model for other governments and enterprises globally.
McDonald’s (MCD): As a result of increasing menu pricing driving sales growth, the fast food business exceeded earnings projections for the third quarter, sending its shares up more than 2% on Monday afternoon. Revenue increased 14% year over year to $6.69 billion, above analysts’ projections of $6.52 billion. Same-store sales increased 8.8%, over analysts’ estimates of 7.79%.
Western Digital (WDC): After announcing that it will split into two distinct publicly listed companies following the collapse of merger discussions with Kioxia Holdings, the computer drive maker saw a more than 6% increase in share price.
SoFi Technologies (SOFI): After raising its forecast for the year and projecting a profit for the fourth quarter, shares of the personal financing startup surged as much as 10% before levelling down.
Ike Perlmutter, a former Marvel executive, has given Peltz ownership of his firm. Peltz has launched a fresh attack on the media behemoth. Despite being one of Marvel Entertainment’s largest independent stockholders, Perlmutter was removed from his role as chairman in March amidst the company’s huge layoffs.
“I can no longer watch Disney underachieve its great potential as someone with a large economic interest in the company’s success,” Perlmutter stated in a statement sent to Yahoo Finance on Monday. “I implore Disney’s board to invite one or more Trian board candidates—including Nelson Peltz, the company’s CEO and founding partner—into the boardroom right now. I think Nelson and Trian can assist Disney’s leadership in more effectively navigating the possibilities and difficulties facing the company.”
The Wall Street Journal was the first to report on the development, and Disney did not immediately reply to a request from Yahoo Finance. Trian declined to comment on it.
Earlier in the month, Yahoo Finance verified that Peltz was pursuing numerous board seats, including one for himself, and that his hedge fund Trian Fund Management had increased its holding in Disney.
According to the Wall Street Journal, Trian’s investment was worth more than $2.5 billion for more than 30 million shares at the time of that disclosure.
With competitors Ford (F) and Stellantis (STLA), General Motors (GM) has also signed a tentative deal with the United Auto Workers (UAW) union.
Once verified, the announcement essentially puts an end to the brutal labour conflict that has completely shut down the car sector. Early on Monday afternoon, Ford’s shares dropped more than 2% while GM and Stellantis’ shares remained unchanged.
Although GM’s tentative agreement’s specifics were not made public, Bloomberg claims that they are similar to what Ford and Stellantis agreed upon. In summary, among other things, Ford and Stellantis have agreed to give union members salary increases of 25%, restore COLA (cost of living adjustment) benefits, implement a three-year wage progression to top pay, convert temporary employees to full-time employment, and eliminate wage levels. Considering the delicate nature of the conversations, GM declined to comment on the agreement at this time.
Due to pension payment commitments and the transition of temporary employees to full-time positions, GM’s negotiations with the UAW apparently took longer than those of its competitors; nevertheless, it now appears that these concerns have been handled. Over the weekend, the UAW intensified its strikes against GM.
Bulls in the stock market are hesitant to believe that equities would be able to recapture their 2023 magic after the S&P 500’s recent collapse.
John Stoltzfus, chief investment strategist at Oppenheimer, cut his price prediction for the S&P 500 from 4400 to 4900. Among the strategists Yahoo Finance surveyed, Stoltzfus had the highest year-end target for the S&P 500.
As increasing rates and growing geopolitical concerns have dragged on stocks, Oppenheimer is still “constructive” on equities, but Stoltzfus pointed out that this revised objective “seems more realistic and achievable at this juncture.”
Stoltzfus raised his year-end price objective on August 1st from 4400 to 4900, citing a better-than-expected US economy. With the labour market continuing tight and the US lately reporting its strongest annualised growth for a quarter in over two years, that story has mostly come to pass.
However, the end of July also turned out to be the peak of the stocks for this year. The S&P 500 and the Nasdaq Composite have entered correction territory since August 1, having retraced more than 10% from their 2023 highs.
Ironically, as market sentiment became negative towards equities due to rising market-priced interest rates and increased geopolitical risk, despite the persistence of the economy and corporate results since the end of July, Stoltzfus noted in a research report on Monday. “This irony suggests at least in part that much of the recent downside in stocks reflects a market tantrum by highly leveraged players in the market who have to deal with the new paradigm of the end of free money orchestrated by the Fed wherein now bond issuers (and other borrowers) pay for the privilege of borrowing and bond buyers and lenders get something in return in the form of a coupon bearing a realistic and fair yield.”
Monday saw a 1% increase in McDonald’s (MCD) shares as the fast food chain revealed third-quarter results that above forecasts thanks to increased menu pricing driving sales growth.
According to Brooke DiPalma of Yahoo Finance:
Sales at company-owned and franchised restaurants are included in the overall system sales, which grew by 11%. According to Bloomberg consensus statistics, global same-store sales increased 8.8%, above analysts’ projections of 7.79%.
Exceeding projections of $6.52 billion, revenue increased 14% year over year to $6.69 billion. At $3.19, adjusted profits per share increased by 19% over the previous year.
According to the statement, CEO and President Chris Kempczinski stated that the outcomes show the company’s “strength as the industry leader”.
We kept providing our consumers with convenience and value, and the macroeconomic climate is developing in accordance with our goals for the year,” he stated.
McDonald’s stock has decreased by over 3% year to date, lagging behind Restaurant Brands International (QSR), which has increased by almost 2%, but ahead of YUM! Brands (YUM) stock, which has decreased by almost 7%.