US stocks slipped on Monday as investors overhauled their views on interest rate cuts after a blowout jobs report ahead of a week of key inflation data and the start of earnings season.
The Dow Jones Industrial Average (^DJI) fell 0.3% after notching a fresh record high as stocks soared to close the week. The S&P 500 (^GSPC) shed roughly 0.2%, while the tech-heavy Nasdaq Composite (^IXIC) led the losses with a 0.4% drop.
Traders have abandoned last week's bets on a 0.50% rate cut in November and now see an 88% chance of a 0.25% move, according to the CME FedWatch Tool. Those expectations could drag on stocks, which have rallied to records amid confidence that big rate cuts and an economic "soft landing" were on the table.
The wait is now on for the October consumer inflation report due Thursday to provide fresh insight into whether the Fed is making progress on bringing already-cooling price pressures down to its 2% target.
The start of third quarter earnings is in focus as Goldman Sachs (GS) raised its target for the S&P 500, saying it expects higher margin growth for corporate companies. After Pepsi (PEP) results on Tuesday, the season gets underway in earnest on Friday with reports from big banks JPMorgan (JPM), Wells Fargo (WFC), and BlackRock (BLK).
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Ines Ferré
Oil extends gains, up 2% as market awaits Israeli retaliation against Iran
Oil extended its gains on Monday, following their biggest weekly gain in more than a year in anticipation of an Israeli retaliation against Iran for last week's missile strike.
West Texas Intermediate futures (CL=F) advanced more than 2% to trade above $76 per barrel after gaining more than 9% last week. Brent crude futures (BZ=F), the international benchmark, also rose more 2% to trade above $79 per barrel.
Tel Aviv has vowed to strike back after Iran launched some 200 ballistic missiles toward Israel on Tuesday. Traders have been pricing in the chances that response will target Iran's oil infrastructure.
"The Iranian military has responded by saying any attack from Israel would trigger yet a stronger response from Iran, so the Geopolitical stages effect on crude continues to grow," Dennis Kissler, BOK Financial's senior vice president of trading, wrote on Monday.
Nvidia (NVDA) and Amazon (AMZN), two of the 'Magnificent Seven' megacap tech stocks, were moving in opposite directions on Monday.
Chip heavyweight Nvidia rose more than 1% to trade above $126 per share.
E-commerce and cloud giant Amazon fell more than 2% after Wells Fargo downgraded the stock to Equal-weight from Overweight amid the expectation that advertising revenue will moderate.
Growth in Amazon's cloud unit isn't likely to make up for margin headwinds, according to Wells Fargo analyst Ken Gawrelski. “AWS strength alone is not enough," he wrote.
Shares of Nvidia rose more than 1%
Ines Ferré
Stocks open lower as 10-year Treasury yield tops 4%
The major averages opened lower on Monday as the 10-year Treasury yield (^TNX) rose back above 4%.
The Dow Jones Industrial Average (^DJI) fell about 0.3% after notching a fresh record high on Friday. The S&P 500 (^GSPC) shed roughly 0.3%, while the tech-heavy Nasdaq Composite (^IXIC) fell 0.5%.
The yield on the benchmark 10-year Treasury (^TNX) hit 4% for the first time since August, as hopes of another 50 basis point rate cut from the Federal Reserve faded after a stronger-than-expected September jobs report.
Oil prices extended gains on Monday following their biggest weekly increase in more than a year as markets awaited an Israeli retaliation against Iran over its missile barrage last week.
West Texas Intermediate crude futures (CL=F) advanced more than 1% to trade above $75 per barrel, after gaining more than 9% last week. Brent futures (BZ=F), the international benchmark, also advanced more than 1% to trade above $79 per barrel.
Laura Bratton
Pfizer stock jumps on reports of Starboard taking $1 billion stake
Pfizer (PFE) stock rose 2.6% premarket Monday as investors reacted to multiplemediareports that activist investor Starboard Value has taken a $1 billion stake in the pharmaceutical giant.
Starboard has approached Pfizer executives Ian Read and Frank D'Amelio about helping turn the tides at the drugmaker, various media outlets reported, citing unnamed sources. Pfizer, the manufacturer of the world's first-approved COVID-19 vaccine, has struggled to maintain its dominance post-pandemic. Read and D'Amelio expressed interest in assisting Starboard, The Wall Street Journal reported. Starboard's plans and the changes it would make at Pfizer are unclear.
The stock's moves early Monday morning will bring it into the positive for the year, but shares are far below record highs of nearly $60 in 2022.
Pfizer is set to report earnings on Oct. 29. Wall Street analysts expect the company to report revenues of $14.8 billion, up about 12% from the prior year. Only half of analysts covering the stock recommend buying it, according to Bloomberg data.
