S&P 500 futures rise from five-month low with Fed and Apple results in view

What’s driving markets

Traders early Monday were starting a week stuffed full of potential market catalysts on an upbeat note.

Stock buyers returned after the S&P 500 on Friday joined the Nasdaq Composite in correction territory having shed more than 10% from its recent high at the end of July to close at its lowest since May.

Relief that the Israel-Hamas war had not drawn in other combatants in the region over the weekend was helping sentiment, according to analysts.

“The conflict did not appear to have broader spillover effects in the Middle East,” said Stephen Innes, managing partner at SPI Asset Management. “That sliver of ‘good news’ has seen the demand for safe-haven assets ease after Israel’s military action in Gaza took a more cautious approach than initially anticipated.”

Equity benchmarks also have been hit of late partly because of some poorly-received third quarter earnings — notably from big technology firms that had led the broader marker higher for much of the year. The next tech behemoth to present its numbers will be Apple
AAPL,
+0.80%,
after the market close on Thursday.

Companies reporting results on Monday include McDonald’s
MCD,
-0.03%,
Western Digital
WDC,
+1.86%
and SoFi Technologies
SOFI,
-0.43%
before the opening bell on Wall Street, followed by Pinterest,
PINS,
+1.08%
Transocean
RIG,
-2.09%
and VF Corporation
VFC,
-5.22%
after the close.

Another factor pressuring equities over the past several weeks was the lurch higher in benchmark bond yields
BX:TMUBMUSD10Y
to 16-year highs above 5% on concerns a robust economy will force the Federal Reserve to keep interest rates high for longer and amid fears additional Treasury issuance will push down prices.

Both of those issues will be addressed on Wednesday, when the Treasury will publish its quarterly refunding announcement in the morning, followed in the afternoon by the Fed’s latest interest rate decision.

Fed Chair Jay Powell is expected to leave borrowing costs unchanged at a range of 5.25% to 5.50%, so investors will be keen to hear if he gives any clues about Fed trajectory in coming months.

The nonfarm payrolls jobs report on Friday will doubtless play an important roll in the Fed’s future deliberations.

Meanwhile, The Bank of England is also expected to stand pat on Thursday, while the Bank of Japan on Tuesday has the potential to rattle markets should it make comments on relaxing its yield curve control policy.

Technical analysts noted that the S&P 500 sits below its 200-day moving average, suggesting it is in a negative trend. But Tom Lee, head of research at Fundstrat reckons that some softer data will help constrain bond yields and support stocks.

“I think there is enough incoming data this week along with the negative positioning for stocks to finally break this doom loop. We may have to wait until month end (tax loss selling this month). And our bigger message is to not get too negative,” said Lee.