Five things you need to know before the market opens on Tuesday, November 1:
1. — Stock Futures Higher As Dollar Retreats, Fed In Sight
U.S. equity futures resumed their recent climb Tuesday, while the dollar retreated against its global peers and oil prices jumped, as investors settled in for the start of the Federal Reserve’s crucial two-day policy meeting in Washington.
With central banks around the world, mindful of the impact of their inflation fight on global growth prospects, signaling the potential for slower rate hikes in the months ahead, investors are betting on a dovish message from Fed Chair Jerome Powell tomorrow, even as they hold onto bets of a 75 basis point increase in its key lending rate, which currently sits between 3% and 3.5%.
The Reserve Bank of Australia, one of the first central banks to downshift the pace of its tightening cycle earlier this year, delivered a smaller-than-expected increase of 25 basis points overnight, taking its benchmark lending rate to a nine-year high of 2.85%.
Anticipation of a Fed ‘pivot’ on rate hikes heading into 2023, as well as resilient industrial and other non-tech earnings for many U.S. companies over the September quarter and stronger-than-expected underlying economic data, has provided a solid boost for stocks heading into the final two months of the year.
Earnings may struggle to maintain that optimism, however, given that collective S&P 500 profits — once the energy sector is removed — are likely to fall by by 0.4%, with only a very modest gain expected over the three months ending in December.
Markets now face a crucial run of key data points, including Wednesday’s Fed rate decision, a Thursday policy meeting at the Bank of England, Friday’s October jobs report and next Tuesday’s mid-term elections, that will test the resilience of its recent rally.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are priced for a 27 point opening bell advance while those linked to the Dow Jones Industrial Average are priced for a 160 point gain. The tech-focused Nasdaq is priced for an 95 point bump.
In overseas markets, the region-wide Stoxx 600 up 1.3% in early Frankfurt trading, while London’s FTSE 100 rose 1.55%, thanks in part to higher oil prices and blowout third quarter earnings of $8.2 billion from BP plc.
Overnight in Asia, the region-wide MSCI ex-Japan index was marked 2.58% higher heading into the close of trading, while Japan’s Nikkei 225 rose 0.33% to a six-week high of 27,5678.92 points.
2. — Toyota Slides As World’s Biggest Carmaker Cuts 2023 Profit Guide
Toyota Motor Co (TM) shares moved lower in pre-market trading after the world’s biggest automaker slashed its near-term profit targets, and lowered its full year production forecast, citing ongoing chip shortages and rising input costs.
Toyota said profits for its September quarter fell 25% from last year to $3.8 billion, firmly shy of Street forecasts, even as revenues rose 22% to 9.2 trillion yen, or $62.1 billion. Surging input costs, from labor to materials, offset the tailwind from a weaker yen which slumped to the lowest levels in more than three decades against the U.S. dollar last month.
Looking into the back half of its financial year, which ends in March, Toyota said it sees sales in the region of $120 billion, with profits of $16.2 billion, but trimmed its output target by 500 million to 9.2 million cars as it expects chip shortages in the sector to persist well into next year.
Toyota’s U.S.-listed shares were marked 0.3% lower in pre-market trading to indicate an opening bell price of $138.40 each. Its main Tokyo listing fell 1.9% Tuesday, compared to a gain of 0.33% for the Nikkei benchmark.
3. — President Biden Threatens ‘Windfall Tax’ On Big Oil Profits
President Joe Biden accused the biggest U.S. oil companies of making “a windfall of war” that powered record profits but left Americans paying more for gas and home heating as a result.
In remarks to reporters at the White House late Monday, Biden threatened to ask Congress to raise taxes on oil companies unless they used those profits to boost production and lower overall retail costs.
“It’s time for these companies to stop war profiteering,” Biden said, adding he would “work with Congress to look at these options that are available to us.”
“If they don’t, they’re going to pay a higher tax on their excess profits, and face other restrictions,” he said.
Exxon Mobil (XOM) and its smaller rival Chevron (CVX) posted combined net income of just over $31 billion for the three months ending in September, taking their collective nine-month total to around $72.4 billion -a figure that still falls well shy of the combined $116.2 billion in net income from Apple (AAPL) and Microsoft (MSFT) — the two biggest tech companies — over the same period.
Exxon shares were marked 1.75% higher in pre-market trading to indicate an opening bell price of $112.75 each, while Chevron gained 1.82% to $184.20 each.
4. — AMD Higher Ahead of Q3 Earnings Amid Chip Sector Gloom
Advanced Micro Devices (AMD) shares moved higher in pre-market trading ahead of the chipmaker’s third quarter earnings after the closing bell.
AMD, which has fallen more than 42% since early August amid a surge in short-term interest rates, a rotation out of tech stocks and new U.S restrictions in technology exports to China, cautioned on October 6 that ‘significantly’ weaker PC demand would trim around $1 billion from its summer revenue forecast.
Texas Instruments (TXN) echoed that concern in its third quarter update last week, noting a pullback in demand for chips found in personal electronics and industrial equipment.
Still, AMD is still likely to post solid revenue gains of 30.2% compared to last year, taking its top line to around $5.62 billion for the three months ending in September. Earnings are likely to fall around 9.3% from last year to 68 cents per share.
AMD shares were marked 1% higher in pre-market trading to indicate an opening bell price of $60.66 each.
5. — Pfizer Q3 Earnings To Focus on Covid Vaccine Sales, Dollar Headwinds
Pfizer (PFE) shares edged higher in pre-market trading ahead of the drug and vaccine maker’s third quarter earnings prior to the opening bell.
Analysts expect Pfizer’s bottom line to rise around 4% from last year to $1.39 per share for the three months ending in September, with revenues down around 12.7% to $21.04 billion thanks in part to currency headwinds linked to the strength of the U.S. dollar.
Earlier this summer, Pfizer held onto its forecast for revenues of between $98 billion and $102 billion for the full year, with sales of its Comirnaty vaccine and Paxlovid Covid antiviral treatment combining for around $54 billion.
Pfizer also said it plans to hike the cost of its Covid vaccine, which it currently sells to the U.S. government for $30 per dose, to between $110 and $130 per dose beginning next year.
Pfizer shares were marked 0.5% higher in pre-market trading to indicate an opening bell price of $46.78 each.
