Article published at 10:45 a.m. CT
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Crude oil prices drop amid hopes of peace deal
- Heavy week of mega-cap earnings on tap
- Federal Reserve expected to keep interest rates steady
We’re walking into a weighty week of potential market-moving events on nearly every corner. Investors will be focused on a number of mega-cap earnings reports and a Federal Reserve meeting that could surprise and/or disappoint.
The U.S. and Iran held off on back-and-forth strikes in the Middle East this weekend after two weeks of hostilities. That’s underpinning hopes of a peace deal and pushing crude oil prices lower. All three major indices started the session solidly upward but pulled back in recent action while crude oil continued to tumble. The S&P 500 Index was flat while the Nasdaq Composite was off 0.14%, led by declines in chip stocks, while the Dow Jones Industrial Average advanced by 0.45%.
Oil is having its biggest one-day drop in two months, basically giving back gains from last week’s jumps and pulling other numbers down as well. WTI Crude Oil prices are falling to the $83 range down 6.8%. Also on the downside was the U.S. 10-year Treasury yield, trading down about 50 basis points.
Airlines were flying high in early trading as well, mostly tied to lower crude oil prices. United Airlines added 1.6% while American Airlines was up 2.15%. Southwest Air advanced 0.91% and Delta Air Lines moved higher by 1.85%.
Investors are preparing for earnings from Microsoft, Meta and Qualcomm after the market close on Wednesday, with a particular eye toward artificial intelligence spending. Alphabet disappointed investors last week with an earnings report in which revenues outpaced Wall Street’s expectations, but profits fell short. The bigger issue was that it upped its AI spending guidance to a range of $195 billion to $205 billion, higher than its previous forecast of $180 billion to $190 billion.
Analysts are projecting a spike in Meta’s capital expenditures, which the company raised in April to a range of $125 billion to $145 billion, roughly double what it was in 2025. Stay tuned.
Apple and Amazon are on the docket after Thursday’s close, with ExxonMobile and Chevron opening their books before the market opens on Friday.
All eyes will be on the Federal Reserve Wednesday afternoon when it is widely expected to keep interest rates intact at the 3.5% to 3.75% range. The CME FedWatch probability of a rate hike fell to 33.7% from 37.4% since Friday. The Fed statement that accompanies the rate announcement is what is likely to move the market in either direction. But investors may be disappointed without much insight, as Fed Chair Kevin Warsh has indicated he wanted to keep the committee’s thoughts close to the vest.
Paramount and Warner Bros. Discovery shares were both dropping this morning after Paramount said it won’t proceed with a merger until next June. Legal challenges over whether the $81 billion deal violates antitrust laws are expected to be heard beginning in November or January, according to the Wall Street Journal. Negotiations for when the trial schedule begins are expected to get underway in coming days. Paramount shares retreated by 1.71% while Warner’s were off 0.58%
In other corporate news, Nvidia shares are falling 4.27% after the Wall Street Journal also reported that the ChatGPT maker was in talks to provide some $250 billion in financing guarantees to OpenAI.
Happy trading!
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