Oct 5 – Wall Street’s primary indices were poised for a lukewarm start on Monday, as technology stocks began to pull back from their recent highs. Investors were on the lookout for new insights regarding monetary policy, particularly with Treasury yields and oil prices remaining elevated.
In premarket trading, chip stocks weighed on the market. Intel saw a decline of 3.8%, while Micron Technology slipped 0.6%. On the other hand, Nvidia increased by 0.5%, following its record high achieved on Friday.
The tech-centric Nasdaq had reached new heights in the previous session, buoyed by weaker-than-expected job data that tempered the anticipation of an interest rate hike from the Federal Reserve in its upcoming policy meeting.
Currently, traders are estimating an 80% chance that the Federal Reserve will keep interest rates unchanged this month, although a rate hike in December is still factored in, according to the CME FedWatch tool.
The benchmark 10-year U.S. Treasury yields were reported at 5.277%, remaining close to multi-year highs due to worries over deteriorating government finances, significant debt issuance, and high energy costs.
Brent crude futures were slightly higher but lingered near the critical $100-a-barrel mark, amid lingering concerns over potential disruptions to Gulf oil infrastructure due to the ongoing conflict between the U.S. and Israel.
Peter Andersen, founder of Andersen Capital Management, commented, “Many investors expect higher yields to derail the equity rally, but I think the market still has enough momentum to sustain further rate increases.”
As of 08:13 a.m. ET, Dow E-minis were up 37 points, approximately 0.07%. S&P 500 E-minis increased by 1.5 points, or 0.02%, while Nasdaq 100 E-minis experienced a drop of 35 points, equivalent to 0.11%.
Despite some geopolitical instability and inflation concerns, optimism surrounding strong corporate earnings has allowed U.S. stocks to outperform their global competitors over the past six months.
October will shift the focus back to quarterly earnings, with around 70% of the S&P 500’s market capitalization expected to report by the end of the month.
Analysts at Goldman Sachs predict that most companies will likely exceed consensus earnings predictions this quarter, projecting a 9% year-on-year earnings growth for the median S&P 500 stock.
In notable movements on Monday, PTC surged 35.7% following an agreement by France’s Schneider Electric to acquire the software company in a cash deal valued at about $22.6 billion.
RXO climbed 24% after C.H. Robinson Worldwide announced its acquisition of the transportation broker in a combined stock-and-cash transaction worth $5.8 billion.
Cerebras Systems increased by 4.4% after OpenAI CEO Sam Altman referred to the chip designer as a “close partner,” highlighting their significant collaboration in advancing technological speed.
Meanwhile, brokerage Panmure Liberum cautioned that the equity bull market might be reaching its conclusion, predicting the S&P 500 could fall over 35% by the end of 2027.
Nevertheless, the short-term outlook remains positive, bolstered by year-end targets from major Wall Street firms. The median year-end forecast among at least 20 brokerages was set above 7,900, based on data compiled by Reuters.
Additionally, market participants are awaiting results from two surveys regarding U.S. services sector activity for September, which are due to be released shortly after the markets open.
