1. U.S. Futures Point to A Triple-Digit Drop
U.S. stock index futures pointed to a sharply lower open, as investors remained in a cautious mood following an abrupt market selloff in the previous trading week. The market shakeout has been blamed on a series of factors, including worries about the impact of a U.S.-China trade war, a spike in U.S. bond yields and caution ahead of the earnings season.
Not helping the mood, Saudi Arabia doubled down on pressure from the West on Sunday over the disappearance of Jamal Khashoggi, a U.S. resident and Washington Post columnist, after he entered the Saudi consulate in Istanbul on Oct. 2. At 5:20AM ET, the blue-chip Dow futures were down 150 points, or about 0.6%, the S&P 500 futures shed 18 points, or around 0.7%, while the tech-heavy Nasdaq 100 futures indicated a decline of 73 points, or roughly 1%.
U.S. stocks finished almost 300 points higher on Friday but still registered steep losses for the week, with the Dow and S&P 500 falling more than 4%, while the Nasdaq posted a decline of 3.7%. Elsewhere, in Europe, the region’s major bourses were broadly lower, with the regional benchmark falling to a 22-month low, as investors watched developments surrounding Brexit talks and Italy’s budget drama.
Earlier, stocks in Asia slipped, with markets in China faring the worst. The mainland’s benchmark Shanghai Composite fell by 1.4% to close at its lowest since November 2014.
2. Bank of America Kicks Off Busy Week of Earnings
A handful of Dow components report in the week ahead, along with dozens of S&P 500 companies, in what will be the first big week of the third-quarter earnings season. Market participants will focus on numbers from Bank of America (NYSE:BAC) slated to be released at 6:45AM ET (1045GMT). Analysts are forecasting earnings per share (EPS) of $0.62 on revenue of $22.62 billion. The same period of last year had $0.48 in EPS and $25.34 billion in revenue.
The first three major banks, JP Morgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC), all reported better-than-expected earnings to unofficially kick off the third quarter earnings season on Friday.
3. U.S. Retail Sales in Focus
Monday’s calendar features the biggest economic data point of the week. The Commerce Department will publish data on retail sales for September at 8:30AM ET (1230GMT), which should lend further support to the notion that the economy is on solid footing. The consensus forecast is that the report will show retail sales rose 0.7% last month, after a mere 0.1% increase in August, the smallest rise in six months. Excluding the automobile sector, sales are expected to increase 0.4%.
Also on the economic calendar will be the New York Fed’s Empire State manufacturing reading for the month of October. Investors will pay particular attention to the data for any impact tariffs are having on the sector. The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was a shade lower at 94.80. Meanwhile, in the bond market, U.S. Treasury prices were little changed, with the benchmark 10-year yield at around 3.15%.
4. Oil Prices Rise Amid Saudi Tensions
Oil prices were higher to start the week, as geopolitical tensions over the disappearance of a prominent Saudi journalist stoked supply worries. Benchmark Brent crude oil jumped by $1.43 a barrel to a high of $81.86 before pulling back to $81.05, up 62 cents. U.S. crude was last up 33 cents at $71.67. Saudi Arabia has been under pressure since Khashoggi, a critic of Riyadh, disappeared on Oct. 2 after visiting the Saudi consulate in Istanbul. U.S. President Donald Trump threatened “severe punishment” if it is found that Khashoggi was killed in the consulate.
Investors suspect the latest development could undermine the leadership of Crown Prince Mohammed bin Salman and has the risk of eventually destabilizing the oil-rich kingdom.
Sears Holdings filed for bankruptcy early Monday after years of staying afloat through financial maneuvering, and announced that Eddie Lampert will be stepping down as CEO, effective immediately, although he remains its chairman. The 125-year-old retailer said it was appointing Mohsin Meghji, managing partner of M-III Partners, as its Chief Restructuring Officer.
As part of the bankruptcy, Sears will shutter 142 stores towards the end of the year end. It expects to begin liquidation sales shortly. Shares in Illinois-based Sears (NASDAQ:SHLD) closed at about 41 cents on Friday.