Pre-market Market Trends
1. On October 7th (Monday) before the U.S. stock market opens, the three major U.S. stock index futures all fell. As of the time of writing, Dow futures were down 0.44%, S&P 500 index futures were down 0.48%, and Nasdaq futures were down 0.66%.
2. The German DAX index fell by 0.18%, the UK FTSE 100 index rose by 0.42%, the French CAC 40 index rose by 0.19%, and the Euro Stoxx 50 index rose by 0.04%.
3. WTI crude oil rose by 2.34%,报价 at $76.12 per barrel. Brent crude oil rose by 1.97%,报价 at $79.59 per barrel.
Market News
The S&P 500 is expected to rise by another 10%! Two well-known strategists on Wall Street are bullish on U.S. stocks. Two top strategists on Wall Street have become more optimistic about the U.S. stock market due to signs of a strong labor market, economic resilience, and interest rates being cut. Michael Wilson of Morgan Stanley, who was one of the most bearish strategists on Wall Street before mid-2024, stated that last Friday's explosive job growth data, along with expectations that the Federal Reserve will further cut interest rates, have improved his view of so-called cyclical stocks relative to safer defensive stocks. Meanwhile, David Kostin, the CEO of Goldman Sachs, also raised his expectations for earnings growth of S&P 500 index companies next year, as a robust macro outlook drives profit margin growth. The strategist raised the 12-month target for the benchmark index from 6,000 points to 6,300 points, which means the index will rise by about 10% from the current level.
The better-than-expected jobs report boosts confidence, and Goldman Sachs lowers the probability of a U.S. economic recession to 15%. After the latest U.S. jobs report showed better-than-all expectations, Goldman Sachs reduced the likelihood of the U.S. falling into a recession within the next 12 months by 5 percentage points to 15%. The U.S. Department of Labor announced last Friday that the increase in U.S. jobs in September was the largest in six months, and the unemployment rate fell to 4.1%. Jan Hatzius, the chief U.S. economist at Goldman Sachs, said in a report on Sunday that the September jobs report "resets the narrative of the job market" and allays concerns about job demand "weakening too quickly to prevent an upward trend in the unemployment rate." The bank maintained its expectation of consecutive rate cuts of 25 basis points, stating that the final interest rate will fall to 3.25-3.5% by June 2025. Hatzius said, "We now believe the risk of another 50 basis point rate cut is much smaller."
Interest rate cut expectations cool down significantly! After the non-farm payrolls report, the "no landing" scenario returns to the U.S. bond market's "topic list." In recent months, the "no landing" scenario - that is, the U.S. economy continues to grow, inflation rebounds, and the Federal Reserve has little room to cut interest rates - has basically disappeared from the U.S. bond market's discussion. Now, just one explosive non-farm employment report has brought this topic back to the market's focus. Data released last Friday showed that the growth rate of the U.S. non-farm employment population was the fastest in six months, the unemployment rate unexpectedly fell, wages rose, which in turn pushed up U.S. Treasury yields and prompted investors to frantically reduce bets on a 50 basis point rate cut by the Federal Reserve next month. For traders, this is the latest painful adjustment, as they have been preparing for slowing economic growth, moderate inflation, and significant rate cuts, buying short-term U.S. Treasury bonds sensitive to the Federal Reserve's interest rate policy in large quantities. On the contrary, last Friday's report has reignited new concerns about economic overheating, disrupting the rise in U.S. Treasuries; in comparison, the 2-year Treasury yield had previously fallen to a multi-year low.
This week, the earnings season kicks off! The S&P 500, which has soared by $8 trillion, faces a big test. After the U.S. stock market experienced a hot start this year, traders have begun to focus on a series of risks, from worries about the economy, to uncertainty about interest rates, to anxiety about the U.S. elections. But the most important variable in the U.S. stock market this week may be: corporate earnings. The S&P 500 index has soared by about 20% in 2024, with a market value increase of over $8 trillion. This rise has been mainly driven by expectations of easing Federal Reserve monetary policy and strong profit prospects. However, as analysts lower their expectations for third-quarter earnings, the trend may be shifting. According to Bloomberg data, it is expected that the quarterly earnings of S&P 500 index companies will grow by 4.7% year-on-year, which is lower than the 7.9% predicted on July 12th and is the lowest increase in four quarters.
The escalation of the situation in the Middle East changes the pattern of the crude oil market: call option trading volume hits a record. Crude oil futures recorded the largest increase in more than a year last week, and the options market is even more frenzied. Due to traders' concerns about the risk of a sharp rise in major prices, the call skew of the next month's WTI crude oil futures soared to the highest level since March 2022, when the Russia-Ukraine conflict triggered concerns about shortages - that is, the sudden disappearance of millions of barrels of oil supply per day from the market from one of the world's largest oil-producing countries. In contrast, this is an astonishing shift. In mid-September, due to concerns about global economic growth slowing down demand and OPEC+ oil-producing countries preparing to increase supply, hedge funds, commodity trading advisors, and other fund managers turned bearish on crude oil. About two weeks ago, the volume of put options reached a peak, and as futures prices fell to around $70 per barrel, traders bought put options. However, the escalation of the situation in the Middle East changed everything. Although some traders sold the previously sold call options, most traders are now seeking to buy protection against price surges.Individual Stock News
Silicon Valley Race: Meta's (META.US) Version of Sora Arrives, and OpenAI Unveils AGI Interaction System with a Trillion-Dollar Valuation. On October 4th, Beijing time, both OpenAI and Meta showcased their new weapons. Meta announced a brand-new AI model called Movie Gen. It consists of two models, Movie Gen Video for video generation and Movie Gen Audio for audio generation, capable of seamlessly producing complete multimedia content, achieving comprehensive coverage from images and visuals to audio. Meta claims that this is "the most advanced media foundation model to date". OpenAI, on the other hand, launched a heavy-hitting interactive interface canvas, stating that "this is a new way to write and program with ChatGPT", marking a significant visual interface upgrade since the release of ChatGPT. Users can collaborate with ChatGPT to complete writing and coding projects, with the entire process being examinable and visible, no longer limited to simple chats.
Pharmaceutical Giant Warning: If This Issue Is Not Resolved, Weight Loss Miracle Drugs May Be "More Harm Than Good". Clinical data shows that 25% of the weight loss after injecting Eli Lilly's (LLY.US) drug comes from the reduction of lean body mass (i.e., fat-free weight, = weight - fat weight), and 40% of the weight loss after injecting Novo Nordisk's (NVO.US) drug is due to the decrease in lean body mass. Currently, Regeneron (REGN.US) is advancing research on a new drug experiment aimed at reducing muscle loss caused by weight loss drugs. It is reported that Regeneron is advancing research on a new drug experiment aimed at reducing muscle loss caused by weight loss drugs. Yancopoulos, who also serves as the company's Chief Scientific Officer, stated: "Clinical studies show that patients treated with the new weight loss drug (GLP-1) lose muscle mass at a much faster rate than those who lose weight through diet or exercise, which can cause health problems for them."
Shell's (SHEL.US) Q3 Refining Margins Drop Significantly. Shell stated on Monday that due to a decline in global demand, the company's refining margins in the third quarter dropped significantly compared to the previous three months, and the earnings from oil product trading have also weakened. In its latest trading report, Shell said that in the three months ending September, its refining margins fell from $7.7 per barrel in the previous quarter to $5.5 per barrel, a nearly 30% decrease. The trading performance of the chemicals and oil products division is expected to be lower than in the second quarter. Shell also raised its liquefied natural gas production forecast for this quarter from the previous 6.8 to 7.4 million tons to 7.3 to 7.7 million tons, with trading performance expected to be on par with the previous quarter. The upstream oil and gas production forecast for this quarter was increased from 1.58 to 1.78 million barrels of oil equivalent per day to 1.74 to 1.84 million barrels of oil equivalent per day.
Rio Tinto (RIO.US) Negotiating Acquisition of Arcadia Lithium (ALTM.US). Mining giant Rio Tinto is in talks to acquire Arcadia Lithium, a lithium producer listed in New York, in the latest attempt to establish a foothold in this rapidly growing market. Rio Tinto stated in a statement on Monday that it has made an acquisition offer to Arcadia Lithium, but it is uncertain whether an agreement can be reached. Rio Tinto said it would not comment further unless it is necessary to provide an update to investors. In January of this year, Livent, headquartered in Philadelphia, and Australia's Allkem merged to form Arcadia Lithium, which currently has a market value of about $3 billion.
Activist Investor Starboard Acquires Pfizer (PFE.US) Shares for $1 Billion. Activist investor Starboard Value has acquired Pfizer shares for about $1 billion and is pushing the company to reform.知情人士表示，Starboard has contacted two former Pfizer executives, Ian Read and Frank D'Amelio, to assist the activist investor's actions, and both executives have expressed interest in helping the activist investor. Reports indicate that more details of Starboard's plan and interactions with Pfizer are currently unclear.
Apollo (APO.US) to Pay $3.6 Billion for Aerospace Manufacturer Barnes (B.US). Apollo Global Management has agreed to acquire Barnes Group in an all-cash deal, valuing the technology and aerospace manufacturer at about $3.6 billion. The two companies said that Barnes shareholders will receive $47.50 in cash per share. This price is a 22% premium over its closing price on June 25. On June 25, it was reported that the company was considering various options including a sale. The transaction is expected to be completed by the end of the first quarter of 2025.