Here is Schwab's early look at the markets for Tuesday, November 3.
Election day opens with the markets still on edge after October's brutal technology sell-off. Volatility might remain elevated today and tomorrow as vote results come in, and any tangles over the election could create uncertainty that hurts the market.
"The U.S. midterm elections likely will return the House to Democratic control while late momentum has moved Democrats to a slight favorite to capture the majority in the Senate as well," said Michael Townsend, Schwab's managing director of legislative and regulatory affairs.
The vote follows earnings late Monday from Apple that almost rounded out the Magnificent Seven results. Only Nvidia remains, on November 17. Apple's results beat estimates across the board, with iPhone and services revenue of $57.6 billion and $31.6 billion surpassing estimates of $56.6 billion and $31.5 billion. Both rose from a year ago, with quarterly iPhone sales up 15%.
Apple had a high bar to climb, considering its shares recently hit record highs and its valuation was near record highs, well above that of many other Magnificent Seven shares. Apple to some extent benefitted from the recent dramatic drop in names linked to AI, because it has spent far less on the technology and appears better off from a free cash flow standpoint.
On Monday, Apple reported earnings per share of $2.10, beating consensus of $1.99. Revenue of $114.5 billion topped the $113.4 billion consensus from FactSet. Even so, shares initially slipped in post-market trading.
Palantir was another big tech name sharing results late yesterday, and initially climbed about 1% in post-market trading after beating estimates on both earnings and revenue. Its fourth-quarter revenue guidance topped consensus.
Arm Holdings and Advanced Micro Devices report later. So far, about two-thirds of all S&P companies have reported and 82% have beaten consensus on earnings per share. Average earnings growth is a solid 29%.
Arm Holdings and AMD both serve as chip market barometers, with AMD's results possibly providing clarity for Nvidia investors since they compete in many of the same high-grade AI chip markets. AMD shares fell sharply with other chip stocks yesterday.
Arm, a chip design firm that competes with Intel. Shares of Intel tumbled 29% on Friday and another 9% Monday as investors found its guidance disappointing. Intel cited issues in the PC market, also served by Arm. It could be interesting to see if Arm sees the same problems affecting the central processing units (CPUs) it designs.
Tech results come as investors re-evaluate the AI trade following last week's plunge. Disappointing results and guidance from Amazon, Intel, and Alphabet set off the selling, with investors increasingly worried that hyperscalers have suffered too much damage to their free cash flow amid the AI spending binge.
Besides tech earnings, this week is packed with U.S. jobs data. It starts at 10 a.m. ET today with the September Job Openings and Labor Turnover Survey (JOLTS), expected to show 7.13 million openings, hardly changed from August. The quit rate, also closely watched, is expected to be near 3.05 million. A drop in openings or quits might be interpreted as a sign of tightening labor conditions, possibly bearish for the economy.
Tomorrow morning brings the ADP employment change report for October after September's strong 90,000 gain. That gain was followed, however, by just a 29,000 rise in the September nonfarm payrolls report, showing once again how the ADP report seldom is a good indicator of what to expect from official government numbers.
Analysts expect Friday's nonfarm payrolls for October to show moderate jobs growth of 65,000.
In data Monday, the October ISM Manufacturing Index headline of 55.5 topped consensus of 54.6 and September's 54.5. Anything above 50 is expansion. Prices paid fell slightly to 75.2% from 77.9% in September, still historically lofty.
The data and today's election follow dismal October performance for the major indexes, especially the tech-powered Nasdaq which fell 5%. The S&P 500 Index, now about 40% weighted toward tech stocks, fell 0.9% in October.
However, that was all tied up in two of 11 sectors—tech and communication services—as the other nine S&P sectors rose last month. Health care and energy were particularly strong amid rotation into defensive and cyclical sectors.
Between the October 6 S&P 500 high and Friday's dive, the SPX fell 3% even though nearly 70% of its components climbed.
The rotation also was into bonds, and Treasury strength continued Monday. The benchmark 10-year Treasury note yield hit eight-week lows near 4.89%, down from last month's peak near 5.36%. Shorter-term yields were flat to higher yesterday following the strong ISM data.
As of late Monday, odds of a December rate hike stood at 73%, according to the CME FedWatch Tool.
The Washington focus today is less on the Fed and more on voting. The government looks likely to be divided to some degree, and traditionally markets appreciate legislative gridlock that can slow regulatory changes. Major indexes have often climbed after mid-terms historically, and November and December tend to be seasonally solid months. Past isn't precedent, however.
The market's struggles yesterday came despite crude oil sinking 8% on hopes for diplomatic progress in Iran. It isn't the first time oil has fallen on such hopes. Weak oil likely helped Treasuries, which in turn helped consumer stocks Monday.
A promising early rally Monday got hijacked by renewed chip and AI selling at midday that sank the S&P 500 Index and the tech-packed Nasdaq. The S&P 500 Equal Weight Index, which weighs all components equally, rose again and outpaced the better known SPX as rotation out of tech and into other sectors continued. Small-caps also suffered less damage.
Eight of 11 S&P sectors rose Monday, pushing breadth wider. About 61% of S&P 500 components now trade above their 50-day moving averages, up from 20% a month ago. Only tech and energy suffered major losses Monday, and by midday advancing shares outnumbered decliners by a three-to-one margin.
This isn't the first sharp slide for tech stocks this year. They dove in May, July, and September, but each drop found buyers and the sector hit an all-time high just three weeks ago. The sector is still double its value at last year's "liberation day" low.
Technical support for the S&P 500 Index could be around 7,300, near the 200-day moving average, after the index closed Friday below 7,600 for the first time since September 16. Defensive hedging demand seems low considering the election, though the equities sell-off late Monday sent the Cboe Volatility Index (VIX) back to 21 after it dipped below 20. Anything 20 or above is considered elevated.
Among individual movers Monday, chip and AI-related names turned early gains into losses. Intel's drop accompanied sharp pullbacks by Applied Digital, Coreweave, and Advanced Micro Devices.
Lumentum initially gained then fell more than 19% on news it's being bought by Marvell Technology for $115 billion. Marvell fell 13%. Selling appeared to reflect disappointment that the deal was all-stock.
Oracle fell 9% after announcing a $10 billion common stock offering.
Airlines including Delta Air Lines and United Airlines rose as yields fell. The lower yield climate also favored home builder stocks, cruise lines, and makers of home appliances. Consumer discretionary and consumer staples were two of the three best performing sectors.
CrowdStrike fell 3.5% despite getting upgraded to buy from Deutsche Bank.
Rivian climbed 8% on an upgrade to buy from UBS.
IDEXX Laboratories climbed 21% on earnings that surpassed consensus for the veterinary diagnostics company.
The Dow Jones Industrial Average® ($DJI) added 213.67 points (+0.41%) Monday to 51,983.98; the S&P 500 Index ($SPX) fell 38.67 points (-0.51%) to 7,541.40, and the Nasdaq Composite® ($COMP) took a spill of 272.68 points (-1.07%) to 25,164.31.