Single Stock Futures Rally as Key Week Begins

Single Stock Futures Rally as Key Week Begins

US single stock futures initiated the week on an optimistic note, with a significant week ahead marked by pivotal events. Investors eagerly anticipate the Federal Reserve’s rate decision, the October jobs report, and Apple’s earnings announcement.

S&P 500 Corrects

The S&P 500 fell into correction territory during the previous week. It posted a 2.50% loss, marking a 10.60% decline from its 2023 peak. The benchmark index is down by 4.00% for October, putting it on track for its third consecutive monthly drop. Such a feat has not occurred ever since 2020.

Federal Reserve Decision

The upcoming Federal Reserve decision scheduled for Wednesday is closely anticipated. The central bank is widely expected to maintain its benchmark interest rate at the current level. Given that surging interest rates have been a primary driver of the stock market correction, investors are hopeful for signs that the Fed may pause its rate hikes, at least for the remainder of 2023.

Interest Rates and 10-Year Treasury Yield

The 10-year Treasury yield, which surpassed 5.00% at the beginning of last week, retreated to 4.84% by the week’s end. Investors are looking to the October jobs report, to be released on Friday, hoping to see a slowing labour market that would provide the Fed with confidence in keeping rates unchanged.

Apple’s Earnings

Apple’s earnings report on Thursday holds particular significance as well. The tech giant, a member of the S&P 500, has entered a correction of its own, with a 15.00% decline from its 52-week high.

Tech Sector Sell-Off

The recent market sell-off has been centred around Nasdaq and tech shares, which are perceived to be most vulnerable to rising interest rates. The Nasdaq Composite, now down over 12.00% from its 2023 peak, is firmly in correction territory. This slide has resulted from disappointing earnings reports from major tech companies, including Google-parent Alphabet.

Market analysts like Tom Lee, co-founder of Fundstrat Global Advisors, believe that this presents an opportunity for investors who have been waiting on the sidelines to enter the tech sector.

Positive Futures: Market Rebound

What’s Behind Monday’s Rebound

According to Adam Crisafulli of Vital Knowledge, several technical factors are contributing to Monday’s rally in stock futures. These factors include oversold prices, with the S&P 500 having declined by over 2.00% for two consecutive weeks. Investor optimism is also playing a role, with hopes for a favourable end-of-month. Besides, benign central bank decisions from the BOJ, FOMC, and BOE strongly affect the jobs data.

Crisafulli notes, “However, after three consecutive months of losses… confidence has evaporated, and there’s very little genuine interest in buying the tape.”

Global Market Outlook

World Shares Mixed as Investors Await Futures vs Options Fed Decision

Internationally, world shares opened mixed, with a focus on the Federal Reserve’s upcoming interest rate decision. European shares saw gains as Germany’s DAX rose 0.50%, France’s CAC 40 advanced 0.40%, and the UK’s FTSE 100 surged 0.70%. US stock futures also showed a 0.50% gain, and the Dow Jones Industrial Average added 0.30%.

In Asian markets, Tokyo’s Nikkei 225 fell by 1.00% as concerns about the Bank of Japan potentially adjusting its monetary policy surfaced. Over the weekend, more than 30 Chinese companies announced plans for share buybacks, aiming to stabilize falling stock prices. China’s Shanghai Composite index inched up by 0.10%.

Key Market Interest Rate Futures

The 10-year Treasury yield has been closely watched, having risen from less than 3.50% to over 5.00% earlier in the past week. However, single stock futures stood at 4.85% on Monday. Escalating tensions in the Israel-Hamas conflict have added to market uncertainty, as Israel’s ground forces entered Gaza over the weekend.

Despite these factors, the price of benchmark US oil fell by $1.42 to $84.12 per barrel, and Brent crude, the international standard, slipped by $1.46 to $87.74 per barrel.

In currency markets, the US dollar edged lower to 149.54 Japanese yen from 149.59 yen, while the euro cost $1.0554, down from $1.0567 late Friday.