1. Wall Street Points to Tentative Rebound After Last Week’s Rout
U.S. stock futures pointed to a positive start to the trading week, with the major indices edging higher, as investors turned their focus to the latest batch of corporate earnings. About a quarter of S&P 500 companies report in what will be the last big week for third-quarter earnings on Wall Street, with results from Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) highlighting the schedule.
Tues: $FB $EBAY $BIDU $GE $MA $KO $UAA $PFE
Wed: $GM $S $YUM
Thurs: $AAPL $SBUX $TEVA $SPOT $DDD
Fri: $BABA $XOM
At 5:45AM ET, the blue-chip Dow futures were up 50 points, or about 0.2%, the S&P 500 futures added 8 points, or around 0.3%, while the tech-heavy Nasdaq 100 futures indicated a gain of 55 points, or roughly 0.8%. Stocks fell sharply on Friday as investors slogged through another volatile session on Wall Street, which saw the S&P 500 end at its lowest level since early May, flirting with correction territory.
Elsewhere, in Europe, the region’s major bourses were broadly higher, with HSBC shares pacing the financial sector, even as political risks in Germany, Italy and the UK continue to weigh on sentiment. Earlier, Asian stock markets gave up most of their morning gains to end mixed, as major Chinese indexes fell more than 2% each by the end of the session.
2. IBM Acquires Red Hat For $34B
IBM (NYSE:IBM) is acquiring Red Hat (NYSE:RHT), a major distributor of open-source software and technology, in a deal valued around $34 billion, as it seeks to diversify its technology hardware and consulting business into higher-margin products and services. According to a joint statement released Sunday, IBM, which has a market capitalization of $114 billion, will pay $190 per share in cash for Red Hat, a 63% premium to Friday’s closing share price of $116.68. The acquisition is by far IBM’s largest deal ever, and the third-biggest in the history of U.S. tech.
The open source, enterprise software maker will become a unit of IBM’s Hybrid Cloud division, with Red Hat CEO Jim Whitehurst joining IBM’s senior management team and reporting to CEO Ginni Rometty.
3. Dollar Holds Near 10-Week High
Away from equities, the dollar was broadly higher against a basket of the other major currencies, holding close to Friday’s 10-week highs.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, edged up 0.2% to 96.33, not far from the 10-week peak of 96.62 set on Friday. Elsewhere in currencies, the euro was a touch lower, as German Chancellor Angela Merkel faced calls from her own conservatives to cede the party’s leadership, further eroding her authority after painful losses in a regional election.
The pound was also slightly lower against the greenback, as investors awaited the autumn budget statement from British Chancellor Philip Hammond.
4. Oil Prices Edge Lower
U.S. West Texas Intermediate (WTI) crude futures were at $67.06 a barrel, down 54 cents, or 0.8%, from their last settlement. Front-month Brent crude oil futures were trading down 63 cents, or 0.8%, at $77.03 a barrel.
Losses were kept in check as looming U.S. sanctions on Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), are widely expected to lead to a tighter market. The sanctions, due to come into force Nov. 4, are being reinstated after U.S. President Donald Trump pulled out of the Iran nuclear deal earlier this year.
5. U.S. PCE Inflation Data
On the economic calendar, investors will get more data on the state of the U.S. consumer with personal income and spending data for September set for release at 8:30AM ET. Economists expect personal income to rise 0.4% over the prior month, while spending is forecast to gain 0.4%, according to estimates. The Fed’s preferred inflation metric, core personal consumption expenditures (PCE), is also set for release in the morning.
The consensus forecast is that the report will show that the core PCE price index inched up 0.1% last month. On an annualized basis, core PCE prices are expected to rise 2%.
The highlight of this week’s data releases will come Friday, when the U.S. Labor Department releases the nonfarm payrolls report for October.