U.S. stock futures edged higher in pre-market trading on Monday as investors braced for another week of potentially uplifting events: the Nov. 8 midterm elections and price data at October consumption.
Futures linked to the S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) each gained around 0.4%. Contracts on the tech-heavy Nasdaq Composite (^IXIC) rose by roughly the same margin after the index posted its worst weekly loss since January.
A batch of bearish corporate news has renewed focus on the wreckage of tech stocks after disappointing results last week dragged down the sector’s biggest hitters – Apple (AAPL), Amazon.com (AMZN) and Alphabet (GOOGL) – at losses of at least 10% last week.
Shares of Apple (AAPL) fell 1.2% ahead of the open after the company said in a statement on Sunday that it expects fewer shipments of its new premium iPhones than expected, citing the COVID lockdowns in China that have hampered factory operations at its biggest smartphone maker Foxconn.
Elsewhere among the tech giants, Facebook’s parent company Meta (META), which was down 73% year-to-date as of Friday’s close and is the worst performer in the S&P 500 this year , is now expected to begin large-scale layoffs this week, according to a Wall Street Journal report on Sunday. Shares rose nearly 4% in the first hours of trading.
Election day can keep investors nervous, as dozens of key races determine which political party controls the congressional agenda. Wall Street has always preferred a divided Congress or White House, with traffic jams making it difficult to enforce any potentially adverse legislation.
“Dating back to 1929 and excluding the Great Depression, some of the S&P 500’s best annual returns have been seen when the sitting president doesn’t have full control of both sides of Congress,” said Megan Horneman, CIO of Verdence Capital Advisors, and Leo Kelly, CEO. said in an emailed comment. “That may be because markets don’t expect major changes in the law with a divided Congress.”
While political campaigns have thrust fiscal leadership into the spotlight, some strategists say medium-term outcomes rarely influence financial markets outside of short-term volatility.
“Markets are influenced more by expected financial conditions and economic catalysts than by the midterm elections,” Dave Sekera, Morningstar’s chief U.S. market strategist, said in a recent note. “Historically, some analysis has shown that stock markets have tended to underperform as they approach the mid-points and then outperform thereafter.”
The consumer price index (CPI) for October published on Thursday, however, should influence the stock markets. Another high inflation reading could bolster expectations that the Federal Reserve will raise its key interest rate more than initially expected.
Economists polled by Bloomberg see the headline CPI at an annual rate of 7.9% for the month, a moderation from September’s 8.2% year-on-year increase. Core CPI, which excludes the volatile food and energy components from the measure, is expected to come in at 6.5%, little change from 6.6% last month.
“Headline inflation has probably peaked, but core inflation only peaked post-pandemic last month,” Baird’s investment strategy analyst Ross Mayfield said in a statement. note sent by e-mail. “While the Fed has hinted that it sees reason to slow its pace, the rate of inflation – even though it has peaked – remains far too high to be comfortable.”
“Until the Fed signals that the ‘pivot’ is near, things could remain difficult,” he added.
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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