Stock futures higher as bond market volatility eases; Week Ahead: Earnings and housing data in focus; News Corp shares leap on plans to re-combine with Fox; Bank of America shares higher ahead of Q3 earnings update and Splunk shares leap as activists at Starboard build stake.
Here are five things you must know for Monday, October 17:
1. — Stock Futures Higher As Bond Market Volatility Eases
U.S. equity futures moved firmly higher Monday, while the dollar retreated against its global peers, as investors looked for an easing in bond market turmoil ahead ahead of another busy week for earnings releases on Wall Street.
Financial markets in Britain, which have caused global uproar of late amid plans by new Prime Minister Liz Truss to boost borrowing to pay for tax cuts, steadied Monday following the appointment of a new finance minister who promised to tear up many of her key fiscal objectives.
The move leaves Truss dangling by a political thread, but has buttressed U.K. bond markets with lower yields and a steady pound, which edged to 1.1259 against the U.S. dollar. Benchmark 10-year U.K. government bond yields were marked 27 basis points lower at 4.06%, helping U.S. 10-year notes fall to around 3.957% in overnight trading.
Market volatility is likely to remain a fixture for investors this week, however, with the Vix index, the CBOE group’s key volatility gauge, rising 1.7% overnight to 32.49 points. That move suggests daily swings of around 72 points over the next 30 days for the biggest U.S. benchmark.
Investors will also be closely tracking moves in the Fed Funds futures market, where traders are betting on a 93.4% chance of a 75 basis point rate hike from the Federal Reserve next month, following last week’s hotter-than-expected September inflation reading of 8.2%, with bets on a fifth consecutive move in December rising to 63.3%.
That said, the U.S. dollar, which tracks the greenback against a basket of its global peers and its typically seen as an indicator of broader risk appetite, was marked 0.33% lower in European trading at 112.94 each, suggesting firmer optimism on Wall Street heading into the start of trading.
Futures contracts tied to the S&P 500 are indicating a 40 point opening bell gain, while those linked to the Dow Jones Industrial Average are priced for a rally of around 305 points. The tech-focused Nasdaq is priced for a 136 point gain.
Stocks in Europe were also higher, with London’s FTSE 100 up 0.4% and the region-wide Stoxx 600 rising 0.45%. Overnight in Asia, Japan’s Nikkei 225 ended 1.16% lower as the yen fell to another 24-year low of 148.65 against the dollar, while the MSCI ex-Japan index added 0.55% into the final hours of trading.
2. — Week Ahead: Earnings and Housing Data in Focus
Earnings and housing data are likely to keep Wall Street focused this week as investors look to the broadening impact of the Federal Reserve’s relentless policy tightening over the final months of the year.
Three jumbo Fed rate hikes, as well as the slow sale of bonds from the central bank’s $8 trillion balance sheet, has taken its biggest toll on the U.S. housing market, where mortgage rates are now nearing 7%, the highest since 2006, triggering marked declines in home prices and stalled new building projects.
Housing starts and building permits data for the month of September will be released at 8:30 am Eastern time Wednesday, bookended by the National Association of Homebuilders monthly update on Tuesday and existing home sales data from the the National Association of Realtors on Thursday, both at 10:00 am Eastern Time.
Around 66 S&P 500 companies are expected to report September quarter earnings this week, including Tesla (TSLA) – Get Tesla Inc. Report, Johnson & Johnson (JNJ) – Get Johnson & Johnson Report, Netflix (NFLX) – Get Netflix Inc. Report, AT&T (T) – Get AT&T Inc. Report, American Airlines (AAL) – Get American Airlines Group Inc. Report and American Express (AXP) – Get American Express Company Report.
Collective third quarter S&P 500 profits are expected to rise by 3.6% from last year to around $46.1 billion, according to data from Refinitiv, with a 5% growth rate forecast for the final three months of the year.
3. — News Corp Shares Leap On Plans to Re-Combine With Fox
News Corp (NWSA) – Get News Corporation Report shares moved firmly higher pre-market trading following a Friday update from billionaire Rupert Murdoch that suggested he could re-combine his print media division with Fox Corp (FOXA) – Get Fox Corporation Report nearly a decade after he chose to separate them.
Murdoch, 91, who along with his son Lachlan has effective control over Fox, said via a company statement that the two media group have formed ‘special committees’ to “thoroughly evaluate a potential combination”, but said no deal could be assumed and provided no time frame for a decision.
Murdoch split Fox from the print-focused News Corp. in 2013, and later orchestrated the sale of its film and television assets to Disney (DIS) – Get The Walt Disney Company Report in 2019 for around $71 billion.
Fox now focuses primarily on news and live sports rights, which are becoming increasingly expensive as big tech companies such as Apple (AAPL) – Get Apple Inc. Report and Amazon (AMZN) – Get Amazon.com Inc. Report continue to expand their media portfolios.
News Corp shares were marked 6.15% higher in pre-market trading to indicate an opening bell price of $16.56 each while Fox Corp shares fell 0.48% to $31.40 each.
4. — Bank of America Shares Higher Ahead of Q3 Earnings Update
Bank of America is expected to follow its Wall Street rivals with bottom line pullback from last year of around 10%, to 77 cents per share, on modestly higher revenues of $23.57 billion. Net interest income gains, thanks in part to the big year-on-year increase in Fed interest rates passed-on to both consumer and business borrowers, will likely offset a slump in investment banking fees and a rise in operating expenses.
Analysts will also be looking for any moves to set aside more capital to cover the potential for bad loans in a weakening domestic — and global economy — after JPMorgan (JPM) – Get JP Morgan Chase & Co. Report, Citigroup (C) – Get Citigroup Inc. Report and Wells Fargo (WFC) – Get Wells Fargo & Company Report booked a collective $1.563 billion in so-called credit reserves on Friday.
Bank of America shares were marked 1.6% higher in pre-market trading to indicate an opening bell price of $32.20 each.
5. — Splunk Shares Leap As Activists At Starboard Build Stake
Splunk, which lost its CFO Jason Child to Britain-based chipmaker Arm Holdings last month, has struggled to grow its cloud migration sales pipeline and could be ripe for changes from Starboard, which reportedly plans to meet with company executives on Tuesday.
Splunk shares have fallen around 40% so far this year, giving the San Francisco-based group a market value of around $11 billion, around half of what Cisco Systems (CSCO) – Get Cisco Systems Inc. Report was reportedly prepared to pay for the group in February.
Splunk shares were marked 5.4% higher in pre-market trading to indicate an opening bell price of $74.00 each.