US stocks rallied on Monday after a bruising sell-off as investors looked ahead to a big week of events, with the Federal Reserve’s latest policy decision and earnings from Apple (AAPL) 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) jumped about 1.6%, or more than 500 points, after dropping about 1.2% at its last close.
The tech-heavy Nasdaq Composite (^IXIC) finished the day up roughly 1.2% in the wake of a downbeat week driven by mixed results for Big Tech earnings.
Eyes are now on the US central bank and Apple, the biggest company on the S&P 500, to lift spirits after a tough few months for the stock market. Also closely watched is the US jobs report for October, due Friday.
A jump in the Fed’s preferred inflation metric has raised expectations that policymakers will stick to their “higher for longer” stance and hold interest rates steady in their decision on Wednesday.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
Apple is set to release its quarterly results on Thursday after the market close, with any impact from China’s moves to constrain the use of iPhones in focus.
Meanwhile, investors are weighing what McDonald’s earnings out Monday say about the US consumer, which has proven resilient in the face of high borrowing costs. The burger giant beat earnings estimates for the third quarter as higher menu prices boosted sales growth.
In commodities, benchmark oil prices fell as Israel’s measured start to its campaign in Gaza eased fears that the conflict will escalate throughout the Middle East — seen as encouraging investors to dive back into markets. West Texas Intermediate futures (CL=F) lost about 3.6% to reach $82.50 a barrel, while Brent futures (BZ=F) shed roughly 3% to trade around $87.84 a barrel.
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Stocks surge back after brutal sell off
Wall Street embraced optimist on Monday, lifting all three major indexes as investors wait for a key decision on interest rates from the Federal Reserve on Wednesday.
The S&P 500 (^GSPC) climbed 1.2%, while the Dow Jones Industrial Average (^DJI) increased about 1.6% or more than 500 points.The tech-heavy Nasdaq Composite (^IXIC) gained roughly 1.2%.
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Markets watchers expect Fed to hold rates steady
The Federal Reserve’s 2-day policy meeting kicks off on Tuesday, leading up to what most observers believe will be a decision to keep rates unchanged. According to the CME FedWatch Tool, the November Fed meeting’s pause could be followed by an increase in December, but the likelihood that the Fed will halt its hiking campaign this year sits at about 75%.
Several experts, including Fed officials themselves, have pointed to the rapid rise in Treasury yields as another reason to keep rates steady for the November policy meeting. The yield on the benchmark 10-year Treasury has increased borrowing costs for households and businesses, acting as another restrictive force throughout the economy, in effect serving as its own kind of rate hike. As of Monday afternoon the 10-Year yields were 4.88%, slightly down from last week’s 4.9%
“The spike in long-term interest rates since the beginning of August is doing a lot of the Federal Reserve’s dirty work for them,” said Bankrate Chief Financial Analyst Greg McBride. “The Fed won’t be compelled to raise interest rates at this meeting because higher bond yields and mortgage rates have further tightened monetary policy on their own.”
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President Biden moves to rein in AI
In a new executive order issued on Monday President Joe Biden is attempting to set new standards for AI, highlighting the privacy and safety concerns that have surrounded the rapidly developing technology. AI has drawn widespread attention for its potential to disrupt several areas of the economy. Many of the country’s largest and most influential tech companies have poured resources into ramping up their AI initiatives, which are seen by industry leaders as a generation-defining technology.
The executive order directs tech companies to evaluate their AI models and put them through safety tests that would be shared with the US government before they are released to the broader public.
Protecting Americans from AI-generated misinformation and fraud is another aim of the order. As part of the plan, the Commerce department will develop guidance to authenticate AI-generated content, allowing Federal agencies to use tools to make it easier for users to tell if content and communications from their government is genuine. The president’s order said this provision would serve as an example for other governments and for businesses around the world, as AI-generated content becomes a bigger part of media and public discourse.
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Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in afternoon trading on Monday:
McDonald’s (MCD): The fast food chain beat earnings estimates for the third quarter as higher menu prices boosted sales growth, sending stocks up more than 2% Monday afternoon. Same-store sales jumped 8.8%, higher than analysts’ estimates of 7.79%, and revenue jumped 14% year-over-year to $6.69 billion, higher than estimates of $6.52 billion.
Western Digital (WDC): The manufacturer of computer drives rose more than 6% after the company announced it would split into two separate publicly traded firms after talks fell apart to merge with Kioxia Holdings.
SoFi Technologies (SOFI): Shares of the personal finance company climbed as much as 10% before settling to under the flat line after SoFi raised its outlook for the year, expecting to turn a profit for the fourth quarter.
Tesla (TSLA): Shares of the all-electric vehicle maker fell 4% and was among a group of auto manufacturers whose shares took a hit following a disappointing forecast from ON Semiconductor (ON) an automotive chip maker whose shares plunged nearly 20% Monday afternoon. Rivian (RIVN) was also down more than 2%.
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APeltz board seat battle boosted by ex-Marvel chairman
Activist investor Nelson Peltz has an ally in his battle for a board seat at Disney (DIS).
Former Marvel executive Ike Perlmutter has entrusted 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 amid the company’s mass layoffs in March and remains one of the company’s biggest independent shareholders.
“As someone with a large economic interest in Disney’s success, I can no longer watch the business underachieve its great potential,” Perlmutter said in a statement provided to Yahoo Finance Monday. “I urge Disney’s board to immediately welcome one or more Trian board candidates, including Trian’s CEO and Founding Partner, Nelson Peltz, into the boardroom. I believe Nelson and Trian can help Disney’s leadership better navigate 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.
Yahoo Finance confirmed earlier this month that Peltz’s hedge fund Trian Fund Management had boosted its stake in Disney and that Peltz was seeking multiple board seats, including one for himself.
At the time of that revelation, Trian’s stake was valued at a more than $2.5 billion for more than 30 million shares, according to the Wall Street Journal.
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Dow jumps more than 300 points
Stocks added to gains in midday trading on Monday with the Dow Jones Industrial Average (^DJI) climbing more than 1%, or more than 300 points, after shedding 350-plus points at its last close. The tech-heavy Nasdaq Composite (^IXIC) was up about 0.5%. The S&P 500 (^GSPC) also jumped roughy 0.5% after officially entering correction territory on Friday.
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GM strikes tentative deal with UAW
General Motors (GM) has reached a tentative agreement with the United Auto Workers (UAW) union, joining rivals Ford (F) and Stellantis (STLA).
The news, once confirmed, effectively ends the bruising labor dispute that has brought the autos industry to a complete halt. Shares of the Big Three fell in early afternoon trading on Monday with Ford dipping more than 2% while GM and Stellantis traded flat.
As Yahoo Finance’s Pras Subramanian reports:
Details of GM’s tentative agreement were not available, but Bloomberg reports the particulars of the deal mirror those agreed to by Ford and Stellantis. To recap, Ford and Stellantis have agreed to pay union workers 25% wage increases, reinstate COLA (cost of living adjustment) benefits, institute a 3-year wage progression to top pay, convert temporary employees to full-time, and end wage tiers among other benefits. GM declined to comment on the deal at this time given the sensitive nature of the discussions.
GM’s talks with the UAW reportedly took longer than its rivals because of pension payment obligations and conversion of workers from temp to full-time, though it appears those issues have been resolved. The UAW stepped up its strikes against GM over the weekend, calling a strike at GM’s Spring Hill (Tenn.) plant, where the Cadillac XT5, the Cadillac XT6, the Cadillac Lyriq EV and the GMC Acadia are assembled, in addition to engines for various Chevy, GMC, and Cadillac trucks.
With a GM deal likely in place, the next steps will include the UAW’s GM national committee voting on approving the agreement, before submitting the deal to a full member vote.
President Biden praised the agreement. “I think it’s great,” Biden said on Monday when asked about the deal.
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JOppenheimer lowers S&P 500 year-end target to 4400
The S&P 500’s recent nose dive has stock market bulls feeling skittish about if stocks can regain their 2023 mojo.
Oppenheimer’s chief investment strategist John Stoltzfus lowered his price target for the S&P 500 to 4900 from 4400. Stoltzfus had held the highest year-end target for the S&P 500 among strategists tracked by Yahoo Finance.
Stoltzfus noted that Oppenheimer is still “constructive” on equities but as rising yields and increased geopolitical concerns have weighed on stocks, this new target “seems more realistic and achievable at this juncture.”
On Aug. 1 Stoltzfus boosted his year-end price target to 4900 from 4400, citing a stronger than expected US economy. That narrative has largely played out with the labor market still remaining tight and the US recently posted its best annualized growth for a quarter in nearly two years.
But the end of July also proved to be the high-water mark for stocks thus far this year. Since Aug. 1 the S&P 500 and the Nasdaq Composite have retraced more than 10% from their 2023 highs and officially entered correction territory.
“Ironically even as economic and corporate earnings resilience have persisted since the end of July, market sentiment soured on stocks as market-priced interest rates moved higher and geopolitical risk ramped up,” 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 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.”
Stoltzfus noted that the recent move lower in stocks isn’t out of the ordinary for a Fed hiking cycle and the turbulence caused by increased tensions in the Middle East also aren’t unusual. He thinks valuations are nearing attractive levels again, and for now the strong economy story remains a tailwind for equities.
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McDonald’s rises on earnings beat
McDonald’s (MCD) shares were up 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 — which include sales at company-owned and franchised restaurants — increased 11%. Global same-store sales jumped 8.8%, higher than analysts’ estimates of 7.79%, per Bloomberg consensus data.
Revenue jumped 14% year over year to $6.69 billion, higher than estimates of $6.52 billion. Adjusted earnings per share came in at 3.19, up 19% from last year.
CEO and President Chris Kempczinski said the results demonstrate the company’s “strength as the industry leader” in the release.
“The macroeconomic environment is unfolding in line with our expectations for the year, and we continued to deliver convenience and value for our customers,” he said.
Shares of McDonald’s are down nearly 3% year to date, trailing behind Restaurant Brands International (QSR), which is up nearly 2% year to date but ahead of YUM! Brands (YUM) shares, which are down nearly 7%.
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Stocks open higher
Stocks opened higher on Monday with all three major indexes notching gains to kick off a busy trading week.
The S&P 500 (^GSPC) jumped about 0.8% after officially entering correction territory on Friday. The Dow Jones Industrial Average (^DJI) also climbed 0.8%, or more than 250 points, after shedding more than 350 points at its last close, while the tech-heavy Nasdaq Composite (^IXIC) soared nearly 0.9%.
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