Before the banks present their quarterly figures tomorrow, US investors are concerned about geopolitics. Trump's loudly announced diesel deal with Russia fizzled out. Oil prices, inflation and interest rate concerns are more important.
Before the start of the US accounting season, US investors were cautious. The US standard value index Dow Jones gained 0.4 percent to 51,851 points. The technology-heavy Nasdaq fell 0.4 percent to 27,246 points and the broad S&P 500 closed little changed at 7,807 points. Rising oil prices and the uncertain situation in the Middle East weighed on sentiment. In addition, investors held back from the bond market due to a lack of stimulus as the US bond market remained closed for the Columbus Day holiday. Stock traders were also concerned about yields recently rising to a 24-year high as high energy prices fueled inflation concerns. The prospect of rising corporate profits and the hope that the Fed could avoid short-term interest rate hikes pushed the three most important stock market indices into positive territory last week.
“The big themes to watch in earnings season are how companies are using and benefiting from AI,” said Clark Bellin of Bellwether Wealth. It is also important whether they maintain or increase their pricing power and how they can deal with the increased credit costs. The reporting season begins on Tuesday. Traditionally, the big US banks start, including Wells Fargo, Goldman Sachs, Citigroup and JPMorgan. According to data from LSEG IBES, the S&P 500's earnings are expected to jump 30.6 percent in the third quarter. "There's a lot to pay attention to," said Robert Pavlik, portfolio manager at Dakota Wealth, regarding the upcoming data and balance sheets. "You're walking on a track in the dark and you don't know if a train is coming. That's why you're just very careful." US consumer and producer prices as well as retail sales for September are also due out later this week.
"This earnings resiliency partly explains why stocks have held up so strongly," said Bret Kenwell, U.S. investment analyst at eToro. The strong growth has allowed investors to overlook higher yields, interest rates and inflation. "Another strong quarter could sustain optimistic sentiment into the end of the year, while disappointment could trigger a broader decline." Statements by the head of the US Federal Reserve Bank of Cleveland, Beth Hammack, also caused uncertainty. The Fed should move relatively quickly toward tighter monetary policy to combat inflation, she said. Traders on Monday saw a nearly 22 percent chance of a rate hike this month, down from 17.7 percent on Friday.
Oil prices climb despite the diesel deal
On the crude oil market, oil prices climbed to a two-week high after the attacks on the airport in the Saudi Arabian capital Riyadh. North Sea crude oil Brent and US light oil WTI rose in price between 1.3 and 1.5 percent to around 106 and 93 dollars per barrel. The Yemeni Houthi rebels have expanded their attacks on Saudi Arabia. Analysts at Goldman Sachs therefore raised their forecast for the Brent price for December from $85 to $90 per barrel. The energy sector was one of the strongest sectors in the S&P 500 due to rising oil prices.
The attacks on Saudi Arabia also overshadowed the prospect of Russian diesel shipments to the United States. US President Donald Trump announced on Friday that he had concluded an agreement with Moscow on the supply of diesel fuel. However, details about this were still unclear. The oil price rally was also capped by Trump's statement that Ukraine and Russia had agreed to stop attacks on each other's energy facilities.
Microsoft and Salesforce asked
In terms of individual stocks, the planned large-scale use of its own AI chips pushed Microsoft's market value back over the four trillion dollar mark for the first time in around a year. The US software company had previously announced the next generation of its own AI chip called Maia 300. This is said to be around 40 percent more efficient in AI applications than leading competing systems, the company said, without naming the systems used for comparison. Next year, Microsoft plans to deploy potentially more than a million of them to support internal AI services and save costs. The shares closed 1.4 percent higher.
Salesforce's shares temporarily rose by five percent and ended trading with a gain of two percent after the analysts at BofA Global Research raised their rating to "Buy" by two notches from "Underperform".
Ebay shares were also in demand with gains of 2.2 percent after Morgan Stanley put the stock on its list of favorites. The technology industry, however, was among the losers. Semiconductor stocks in particular fell: the Philadelphia semiconductor index slipped to a three-week low.
In contrast, IonQ shares fell by nine percent after the quantum computer specialist announced a takeover of the cybersecurity company Elisity for up to $1.3 billion as part of a stock transaction.
There were also long faces among Chipotle investors after Starbucks declared that it did not want to buy the restaurant chain. "We want to be clear: We are not buying Chipotle," said a Starbucks spokesman, responding to a report in the Financial Times last week that Starbucks had been working with consultants for months on plans to take over the chain known for its "burrito" doughnuts. It would have been the largest gastronomy merger in economic history. Together, Starbucks and Chipotle have sales of around $50 billion a year. Chipotle shares lost 3.8 percent, while Starbucks shares rose by 1.7 percent.
