U.S. stocks rebounded on Monday after a sharp selloff as investors awaited a big week of events with the Federal Reserve’s latest monetary policy decision and Apple’s (AAPL) earnings on the calendar.
The benchmark S&P 500 (^GSPC) climbed 1.2% at the closing bell after officially entering correction territory, while the Dow Jones Industrial Average (^DJI) rose about 1.6%, or more than 500 points, after It fell about 1.2% in its IPO last closing.
The tech-heavy Nasdaq Composite (^IXIC) ended the day up about 1.2%, after a poor week caused by mixed results in big tech earnings.
Eyes now turn to the Federal Reserve and Apple, the largest company in the S&P 500, to lift sentiment after a difficult few months for the stock market. The US labor market report for October, which is due to appear on Friday, will also be closely watched.
A rise in the Fed’s preferred inflation measure has raised expectations that policymakers will stick to their “longer-term higher” stance and keep interest rates stable in their decision on Wednesday.
Read more: What the Fed’s pause on rate hikes means for bank accounts, CDs, loans and credit cards
Apple is expected to report quarterly results after the market close on Thursday, with a focus on the impact of China’s measures to restrict iPhone use.
Meanwhile, investors are weighing what McDonald’s results released Monday say about the U.S. consumer, who has proven resilient in the face of high borrowing costs. The burger giant beat third-quarter profit estimates as higher menu prices boosted sales growth.
In commodities, benchmark oil prices fell as Israel’s slow start to its campaign in Gaza eased fears that the conflict could escalate across the Middle East – seen as an incentive for investors to dive back into the markets. West Texas Intermediate futures (CL=F) lost 1.8% to settle at $84.01 a barrel, while Brent futures (BZ=F) lost 1.5% to trade at around $87.86 a barrel.
Stocks are rising again after a brutal sell-off
Wall Street was bullish on Monday, lifting all three major indexes as investors await a key interest rate decision from the Federal Reserve on Wednesday.
The S&P 500 (^GSPC) rose 1.2%, while the Dow Jones Industrial Average (^DJI) gained about 1.6%, or more than 500 points. The tech-heavy Nasdaq Composite (^IXIC) gained about 1.2%.
Market observers expect the Fed to keep interest rates stable
The Federal Reserve’s two-day policy meeting begins on Tuesday, which most observers believe will result in a decision to keep interest rates unchanged. According to the CME FedWatch tool, the Fed meeting break in November could be followed by a hike in December, but the probability that the Fed will abandon its rate hike campaign this year is about 75%.
Several experts, including Fed officials themselves, have cited the rapid rise in Treasury yields as another reason to keep rates stable for the November policy meeting. The yield on the benchmark 10-year Treasury note has increased borrowing costs for households and businesses and acted as another restrictive force across the economy, effectively prompting its own interest rate hike. As of Monday afternoon, 10-year Treasury yields were at 4.88%, slightly down from the previous week’s 4.9%.
“The rise in long-term interest rates since early August is doing a lot of the Federal Reserve’s dirty work,” said Greg McBride, chief financial analyst at Bankrate. “The Fed will not be forced to raise interest rates at this meeting because higher bond yields and mortgage rates have further tightened monetary policy on their own.”
President Biden is trying to curb AI
In a new executive order issued Monday, President Joe Biden seeks to set new standards for AI, highlighting the privacy and security concerns surrounding the rapidly evolving technology. AI has gained widespread attention due to its potential to revolutionize several areas of the economy. Many of the country’s largest and most influential technology companies have poured resources into expanding their AI initiatives, viewed by industry leaders as a generation-defining technology.
The executive order directs technology companies to evaluate their AI models and subject them to security tests that will be reported to the U.S. government before they are released to the general public.
Another goal of the regulation is to protect Americans from AI-generated misinformation and fraud. Under the plan, the Commerce Department will develop guidelines for authenticating AI-generated content, allowing federal agencies to use tools to help users more easily identify whether their government content and communications are genuine. The president’s order said this provision would serve as an example for other governments and companies around the world as AI-generated content takes up an increasingly larger portion of media and public discourse.
Stock trends in afternoon trading
Here are some of the stocks topping Yahoo Finance’s trending ticker page in afternoon trading on Monday:
McDonald’s (MCD): The fast-food chain beat third-quarter profit estimates as higher menu prices boosted sales growth and shares rose more than 2% on Monday afternoon. Same-store sales rose 8.8%, beating analyst estimates of 7.79%, and revenue rose 14% year over year to $6.69 billion, above estimates of $6.52 billion U.S. dollar.
Western Digital (WDC): The computer drive maker rose more than 6% after the company said it would split into two separate listed companies after merger talks with Kioxia Holdings collapsed.
SoFi Technologies (SOFI): Shares of the private finance company rose as much as 10% before settling below zero after SoFi raised its annual outlook and expected a profit in the fourth quarter.
Tesla (TSLA): Shares of the all-electric vehicle maker fell 4%, among a group of automakers whose shares took a hit following a disappointing forecast from ON Semiconductor (ON), an automotive chip maker whose shares plunged nearly 20% on Friday afternoon. Rivian (RIVN) also lost more than 2%.
AThe fight for seats on the Peltz board is being intensified by the former Marvel chairman
Activist investor Nelson Peltz has an ally in his fight for a seat on Disney’s (DIS) board.
Former Marvel executive Ike Perlmutter has confided his stake in the company to Peltz, who recently launched a renewed attack on the media giant. Perlmutter was ousted from his position as chairman of Marvel Entertainment in March due to the company’s mass layoffs and remains one of the company’s largest independent shareholders.
“As someone who has a strong economic stake in Disney’s success, I can no longer stand by and watch the company fail to realize its great potential,” Perlmutter said in a statement provided to Yahoo Finance on Monday. “I call on the Disney Board of Directors to immediately welcome one or more of Trian’s board candidates, including Trian CEO and founding partner Nelson Peltz, to the boardroom. I believe Nelson and Trian can help Disney leadership better address the company’s challenges and opportunities.”
Trian declined to comment on the development, which was first reported by The Wall Street Journal, while Disney did not immediately respond to Yahoo Finance’s request for comment.
Yahoo Finance confirmed earlier this month that Peltz’s hedge fund Trian Fund Management had increased its stake in Disney and that Peltz was seeking several board seats, including one for himself.
According to the Wall Street Journal, at the time of this revelation, Trian’s stake was valued at more than $2.5 billion, representing more than 30 million shares.
Read more here.
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Dow jumps more than 300 points
Stocks rose in midday trading on Monday, with the Dow Jones Industrial Average (^DJI) gaining more than 1%, or more than 300 points, after losing more than 350 points at its previous close. The tech-heavy Nasdaq Composite (^IXIC) rose about 0.5%. The S&P 500 (^GSPC) also rose about 0.5% after officially entering correction territory on Friday.
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GM reaches tentative deal with UAW
General Motors (GM) has reached a tentative agreement with the United Auto Workers (UAW), joining rivals Ford (F) and Stellantis (STLA).
Once the news is confirmed, it will effectively end the bitter labor dispute that has brought the automotive industry to a complete standstill. Shares of the Big Three fell in early afternoon trading on Monday, with Ford falling more than 2% while GM and Stellantis were flat.
As Yahoo Finance’s Pras Subramanian reports:
Details of GM’s tentative agreement were not available, but Bloomberg reports that the details of the deal are consistent with those agreed to by Ford and Stellantis. To recap: Ford and Stellantis have agreed to give union workers 25% wage increases, reinstate COLA (cost of living adjustment benefits), implement a three-year wage increase to top wages, convert temporary workers to full-time workers, and the Abolishing pay scales is one of the advantages. Given the sensitive nature of the discussions, GM declined to comment on the deal at this time.
GM’s talks with the UAW reportedly took longer than its competitors because of pension payment obligations and the transition from temporary workers to full-time workers, although those issues appear to have been resolved. The UAW stepped up its strikes against GM over the weekend, calling for a strike at GM’s Spring Hill (Tenn.) plant, which assembles engines for the Cadillac XT5, Cadillac XT6, Cadillac Lyriq EV and GMC Acadia, along with various Chevy engines -, GMC and Cadillac trucks.
With a GM deal likely to go through, the next steps will be for the UAW’s GM National Committee to vote to approve the agreement before the deal is put to a vote by the full membership.
President Biden praised the agreement. “I think it’s great,” Biden said Monday when asked about the deal.
Read more here.
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Oppenheimer lowers S&P 500 year-end target to 4,400
The S&P 500’s recent plunge has stock market bulls worried about whether stocks can regain their 2023 mojo.
Oppenheimer’s chief investment strategist John Stoltzfus lowered his price target for the S&P 500 from 4,400 to 4,900. Stoltzfus had the highest year-end target for the S&P 500 among strategists tracked by Yahoo Finance.
Stoltzfus noted that Oppenheimer is still “constructive” on stocks, but as rising yields and rising geopolitical concerns have weighed on stocks, this new target appears “more realistic and achievable at this point.”
On August 1, Stoltzfus raised his year-end price target from 4,400 to 4,900, citing a stronger-than-expected U.S. economy. That narrative has largely held true as the labor market remains tight and the U.S. recently posted its best quarterly annual growth in nearly two years.
The end of July also turned out to be the high water mark for the stock markets so far this year. Since August 1, the S&P 500 and Nasdaq Composite have declined more than 10% from their 2023 highs and have officially entered correction territory.
“Ironically, although the resilience of the economy and corporate earnings has continued since late July, market sentiment toward equities deteriorated as market interest rates rose and geopolitical risk increased,” Stoltzfus wrote in a research note on Monday. “This irony suggests, at least in part, that much of the recent downside in stocks reflects a market rush by heavily leveraged market participants grappling with the new paradigm of the Fed-orchestrated end of free money, in which bond issuers (and others) are now “Borrowers) pay for the privilege of borrowing, and bond buyers and lenders receive in return a coupon with a realistic and fair return.”
Stoltzfus noted that the recent decline in stock prices is not unusual for a Fed rate hike cycle, and that the turmoil caused by rising tensions in the Middle East is also not unusual. He believes valuations are approaching attractive levels again and the strong economy remains a tailwind for stocks for now.
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McDonald’s rises due to profit overruns
McDonald’s (MCD) shares rose about 1% on Monday after the fast-food giant reported third-quarter earnings that beat expectations as higher menu prices boosted sales growth.
As Yahoo Finance’s Brooke DiPalma reports:
Global systemwide sales – including sales at company-owned and franchised restaurants – increased 11%. Global same-store sales rose 8.8%, beating analyst estimates of 7.79%, according to Bloomberg consensus data.
Revenue rose 14% year-over-year to $6.69 billion, beating estimates of $6.52 billion. Adjusted earnings per share were 3.19, up 19% year over year.
CEO and President Chris Kempczinski said in the press release that the results demonstrate the company’s “strength as an industry leader.”
“The macroeconomic environment is evolving in line with our expectations for the year and we continue to provide convenience and value to our customers,” he said.
McDonald’s shares are down nearly 3% year-to-date, trailing Restaurant Brands International (QSR), which is up nearly 2% year-to-date, but ahead of YUM! Brands (YUM) shares are down nearly 7%.
Read more here.
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Stocks open higher
Stocks opened higher on Monday, with all three major indexes posting gains to start a busy trading week.
The S&P 500 (^GSPC) rose about 0.8% after officially entering correction territory on Friday. The Dow Jones Industrial Average (^DJI) also rose 0.8%, or more than 250 points, after losing more than 350 points in its previous close, while the tech-heavy Nasdaq Composite (^IXIC) rose nearly 0.9% increased.
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