Oil Drops While Other Inflation Pressures Look to Accelerate: 8 Key Items Shaping the Stock Market Monday
These are the early headlines and other items poised to influence the market at the start of the trading day. As we share this collection of market drivers, U.S. equity futures point to a positive start for November trading.
1. President Trump had a candid phone call with Israeli Prime Minister Benjamin Netanyahu Saturday about the state of U.S. negotiations with Iran and how quickly to return to combat, according to one Israeli and one U.S. source. The sources said Netanyahu is pressing Trump to strike Iran immediately after the midterm elections on Tuesday. But Trump, for now, wants to let negotiations play out. (Axios)
That follows comments from U.S. Secretary of State Marco Rubio that Trump prefers not to use military force and would like to resolve the Iranian war “diplomatically.” As of this writing, that combination has brent crude and WTI prices down over 4%, which in turn is helping lift equity futures as we get ready to begin November trading.
Coming up we will get a look a first look at November inflation data courtesy of ISM’s Manufacturing PMI. Findings from S&P Global’s Final Manufacturing PMI reports for the Eurozone and U.K. found “a rapid acceleration of cost pressures as input prices rose at the quickest pace since May.” In response, European manufacturers raised their prices “sharply in response,” while in the U.K., “Output charges rose at the quickest pace in three months.”
This reaffirms the likelihood we’ll see another leg up in ISM’s November Manufacturing PMI on Monday and in its November Services PMI on Wednesday, setting the state for unfavorable November CPI and PPI readings in the coming weeks. However, because the market is a forward-looking animal, it will likely downplay Monday’s data, focusing instead on the fall in oil prices and what that could mean several months from now. Our view is that we’ve been here before with potential diplomatic solutions between the U.S. and Iran, and we’ll want to see further progress before simply assuming a deal will emerge this time around.
2. Millions of Americans who depend on Obamacare for their health insurance face another double-digit price increase next year, adding to the financial toll that has already driven millions of others to drop coverage since last year. The price increases largely reflect higher medical costs across the country… The average price of health insurance in the Obamacare marketplaces will rise by 13 percent next year, according to an analysis on Friday by KFF, the health research group. (NY Times)
While the market will understandably focus on the movement in oil prices, let’s not forget there are other inflationary tailwinds at work. To the above, consider the comment in those November PMI findings above from S&P Global about the direction of output prices. We’ve heard similar comments during the current earnings season from Coca-Cola ($KO), Procter & Gamble ($PG), Reckitt, Nestlé ($NSRGY) and others.
To that growing list we can add, Ryanair as per the FT on Monday morning, it expects to raise fares by double-digit percentages next year, but it needs to find other cost savings in the business to offset financial pressures resulting from the Iran war.
3. President Donald Trump said he may have to become “Mr. Veto” if Democrats win a majority in Tuesday’s midterms, according to a clip of a New York Post interview aired Sunday on Fox News… It marks a rare acknowledgment by Trump that his party may lose the midterm elections, even as he heads Sunday to Kansas and Iowa to hold more rallies. (Bloomberg)
A scan at both Kalshi and Polymarket show both prediction sites show Democrats are likely to take control of both the House and Senate, with Polymarket seeing a 72% chance of a Democratic sweet of the midterms.
Much like the emotions that can emerge when rooting for one’s sports teams, we recognize politics can be emotional and divisive. We’ll let others speak to that, and instead focus on how the potential policy impacts may alter the current landscape and what’s expected of it.
4. Alphabet Inc. is raising funds in the euro bond market for the second time this year, offering considerably higher yields than in its sale in May after concerns over the pace of AI spending drove a credit-market selloff. The Google parent has opened books on a seven-part offering spanning maturities from two to 19 years, according to a person familiar with the matter who asked not to be identified. (Bloomberg)
Amazon has disclosed a new loan facility that allows it to borrow up to $80 billion to purchase technology infrastructure assets. The financing arrangement comes as the company increases spending on cloud computing and AI infrastructure. According to Amazon’s third-quarter filing with the US Securities and Exchange Commission (SEC), the facility forms part of its supplier financing arrangements for technology infrastructure purchases. The company can access the funds at its discretion between the first quarter of 2027 and the third quarter of 2028. (Cloud Computing News)
Following the recent offering by SpaceX ($SPCX), Meta ($META) and Microsoft ($MSFT), given the focus on capex funding, we rather suspected we would see similar moves by Amazon ($AMZN) and Google ($GOOGL), especially given how oversubscribed the META and MSDFT offerings were. Our thinking has been that such moves would ease funding concerns and anxiety, refocusing investors on fundamentals and the pullback in the shares of those hyperscalers and companies positioned to benefit from their capex spend. While it’s temping to pick up some shares on Monday, the more prudent move is to get through the upcoming inflation data and the outcome of the midterm elections before putting capital to work.
At the same time, we are also seeing that OpenAI has cut its latest fund-raising target by $10 billion to about $20 billion, with its post money valuation targeting $1.25 trillion, down from the prior $1.4 trillion target. Those same reports point to a commitment deadline of this Friday, which would be a few days before Anthropic is expected to kick off its IPO roadshow.
5. John Ternus will host his first earnings call as Apple’s CEO on Monday, with investors looking to the company’s forecast to determine whether a blitz of new products can help offset rising costs for memory chips… Apple will face scrutiny over three key issues: its crucial holiday-quarter outlook, Ternus’ remarks on AI and the revamped Siri, and rising memory-chip costs that analysts expect to drag quarterly profit growth to its weakest in six quarters. (Reuters)
It’s fair to say the new CEO at Apple ($AAPL), his comments about those three key issues and how the market interprets them has the potential to sway the market. Reason being, Apple shares have edged out Nvidia ($NVDA) shares to once again become the largest holding in the S&P 500 and the Nasdaq Composite.
We expect Ternus will talk about the robust demand for Apple’s new products, especially the Duo which per reports is seeing production hikes. The key for the very important iPhone business as we see it will be the mix of products and their average selling prices (ASPs) for the current quarter and what that mix is likely to be in the coming ones. That product and ASP mix will be a gut check on Ternus’s comments about margins. Meanwhile, the high margin Services business should benefit from the continued share gains of Apple’s ecosystem as well as price increases instilled earlier this year.
Coming off the last two weeks of quarterly results from hyperscalers and the focus that put on free cash flow, Apple should shine in that department. It also has us wondering what the company might say on either the dividend front, buybacks or both.
6. Marvell Technology officially plans to combine with Lumentum Holdings in a massive deal meant to target the optical-networking market. The deal will be financed entirely through stock, with Marvell offering about $1,132 per Lumentum share, or 24% above where those shares traded as of the close on Oct. 28, before rumors began swirling about a possible combination. (MarketWatch)
Under the terms of the agreement, Lumentum ($LITE) stockholders will receive a fixed exchange ratio of 4.500 shares of Marvell ($MRVL) common stock for each share of Lumentum common stock they own. The transaction has an implied enterprise value of $115 billion for Lumentum
From a strategic perspective, we see the tie up as a positive one, but we’re now working through the numbers to determine potential any potential dilution. We’ll have more to say on this following Monday morning’s Marvell and Lumentum joint conference call at 8:00 a.m. ET to discuss the transaction.
7. Economic data today per TipRanks: S&P Global U.S. Manufacturing PMI – Final (Oct.), ISM Manufacturing Index (Oct.), Construction Spending (Sept.), Senior Loan Officer Opinion Survey on Bank Lending Practices (Oct.)
8. Companies reporting today per TipRanks: AM – Open: Check Point Software ($CHKP), Entergy ($ETR), Estée Lauder ($EL), Fox Corp. ($FOXA), Marriott International ($MAR). Close: Apple ($AAPL), Diamondback Energy ($FANG), ON Semiconductor ($ON), Palantir Technologies ($PLTR), Realty Income ($O), Vertex Pharmaceuticals ($VRTX), Williams Companies ($WMB)
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At the time of publication, TheStreet Pro Portfolio was long AAPL, AMZN, GOOGL, META, MSFT, LITE, MRVL, NVDA and PLTR.
