Dow falls nearly 100 points on 1st day of November as Fed decision looms

Risk assets have staged a good run over the last few weeks, but the pace of the rally is problematic, according to Barclays.

“We believe risk assets have now rallied too much, too soon,” wrote the bank’s global chairman of research Ajay Rajadhyaksha. “After two weeks being tactically neutral, we recommend shorting risk assets again.”

Stocks staged a massive comeback recently in anticipation of a potential Fed swivel, but markets are acting overly optimistic given that the recent data hasn’t shown a stark shift in inflation, Rajadhyaksha said.

“Risk assets have rallied strongly on anticipation of a pivot by central banks,” he wrote. “We think this is by no means clear from recent data; markets seem too optimistic.”

— Samantha Subin

Stocks continued moving with earnings season in full swing.

Uber jumped 12% after the company reported revenue that exceeded Wall Street’s expectations and gave better-than-anticipated guidance for its fourth quarter. It projected strong bookings growth and adjusted EBITDA of $600 million to $630 million compared to an analyst estimate of $568 million in adjusted EBITDA.

Abiomed surged 50% after the company announced it has agreed to be acquired by Johnson & Johnson for $16.6 billion in cash.

Goodyear Tire fell 13% after the tire company’s earnings fell short of expectations due in part to higher costs and a surging dollar.

See the full list here.

— Alex Harring

Shares of Snap and Meta Platforms popped following an Axios report that an FCC commissioner is reportedly calling on the government to ban TikTok.

Snap’s stock jumped 4%, while Meta Platforms added about 3%.

— Samantha Subin

Borrowing costs have spiraled higher since the Federal Reserve kicked off its rate-hiking campaign in March, eventually bringing mortgage rates to historic highs. Just last week, the 30-year fixed rate mortgage cracked levels last seen in April 2002, according to Freddie Mac: 7.08%. 

The cost adds up over time: The total amount of interest paid on a $350,000 30-year fixed-rate mortgage at that 7.08% rate would be nearly $500,000, according to an amortization schedule from Bankrate. That’s compared to $250,000 in interest expense back when rates were 3.85% in March.

As the Fed prepares to raise interest rates by another 0.75 percentage point on Wednesday, here are other areas of consumer finance that have since become more expensive.

Credit card debt costs are expected to rise, too. The expense of these debts has already climbed $20.4 billion due to this year’s Fed rate hikes, WalletHub found. This could rise by another $5.1 billion this year if the central bank raises its target by 75 basis points this week.

Data points for used and new vehicle APRs are monthly and are recent as of September.

— Darla Mercado, Nick Wells

A shift from the Federal Reserve’s hawkish monetary tightening stance could push the economy into a “significant” recession, according to Wolfe Research’s Chris Senyek.

What happens next depends on Fed Chair Jerome Powell’s tone come Wednesday, with a more dovish stance likely to fuel some near-term upside for markets, he wrote in a note to clients Tuesday.

“However, even if this is the case, the Fed is on track to undertake the sharpest tightening cycle since the 1970s,” he said. “In our view, this is almost guaranteed to spark a significant (not shallow) recession.”

Senyek also doesn’t expect the Federal Open Market Committee cut rates until inflation shows it’s easing back down to its long-term 2% target.

Markets have rallied over the past few weeks as investors bet the Fed is preparing for a policy pivot.

“The market appears to be defining a “pivot” as a downshift from +75bps hikes to +50bps increases in December & February,” he said.

— Samantha Subin

After a strong job openings and labor turnover survey — also known as JOLTS —on Tuesday, the Federal Reserve is likely to stay on its path of aggressive rate hikes.

“Hopes for a Fed dovish pivot are misplaced if today’s job openings are any guide,” wrote Ron Temple, head of U.S. equity at Lazard Asset Management. “With nearly 1.9 open jobs for each unemployed person, labor market tightness remains a key challenge for controlling inflation.”

The JOLTS number and last month’s nonfarm payrolls print show that the central bank is far from declaring victory over inflation, he said. That means they can’t yet take their foot off the brake.

“Markets may be underestimating where the Fed’s terminal rate is and should prepare for further financial tightening,” he said.

—Carmen Reinicke

Investors shouldn’t expect a year-end rally just because they’re entering a seasonally strong stretch for markets, according to Citi.

“No year-end rally in our view,” Hannah Sheetz wrote in a Tuesday note. “Seasonals are much stronger when returns are positive through October — this year they are not.”

Some investors hope that stocks will jump after this month’s midterm elections, which could resolve some market uncertainty, according to the note. However, Citi expects that any outperformance could be “just a normal Santa Claus rally in disguise.”

Instead, the strength of the winter rally is likely to be weak given lackluster returns during the summer months. Sheetz said any systematic seasonal strategy investors employ will not be as effective as they hope.

“[A] rotation strategy is mildly profitable when applied across asset classes, but that it is unlikely to work this year given weak summer returns,” Sheetz wrote.

— Sarah Min

Billionaire investor Leon Cooperman cautioned that the final bottom of the stock market is yet to come as the economy is poised to hit a recession next year.

The chair and CEO of the Omega Family Office said the market is in a seasonally strong period, but an unfavorable macro environment — the Federal Reserve’s aggressive rate hikes, a strong dollar and high oil prices — will still cause a major economic downturn in 2023.

“The market generally drops around 35% from the peak in response to a recession,” Cooperman said. “I find many things to do but I really don’t like the S&P that much. I don’t think the final lows have been hit.”

— Yun Li

As Tuesday kicks off the final eight weeks of the year, the leadership of the “average stock” will continue to be a big theme, according to Strategas’ Chris Verrone.

“What’s been telling about the year is the stability of this trend – the S&P is still off roughly -20% YTD, but the average stock has been the relative winner in both drawdown and rally phases,” he said in a note Tuesday.

Defense contractors have been big leaders for much of the year within the industrials sector. Energy “hasn’t relinquished its leadership credentials,” Verrone added, even with the S&P 500 up 10% or so from its mid-October lows.

“Two pairs that have been seminal in our thinking all year – Tech relative to Energy, and Discretionary relative to Energy – continue to hover near their YTD lows,” he said.

— Tanaya Macheel

Metals and oil were gaining as investors watched for a less hawkish stance on inflation with the November Fed meeting kicking off Tuesday.

Spot gold was up 1.2%, with gold futures adding 1%. Palladium, silver and platinum jumped 5.5%, 3.9% and 2.3%, respectively.

Oil was also trading up. U.S. West Texas International and Brent Crude added 3.2% and 2.8%, respectively.

— Alex Harring

Inflation savings bonds, also known as Series I bonds, will pay 6.89% between Nov. 1 and April 30, the Treasury Department said Tuesday. That’s down from the prior rate of 9.62% that ran from May through October.

It’s the third highest rate since I bonds were introduced in 1998.

Purchases of the bonds, available through TreasuryDirect, are capped at a maximum $10,000 per person each year, and they must be held for at least one year. After that, the last three months’ interest is sacrificed if the bonds are sold back to the Treasury before five years.

— Scott Schnipper, Kate Dore

Job openings rebounded sharply in September, indicating that the labor market is still tight.

The number of employment vacancies totaled 10.72 million for the month, well above the 9.85 million FactSet estimate, according to data Tuesday from the Bureau of Labor Statistics. The total was about half a million above the August level.

In other economic data, the ISM Manufacturing index posted a 50.2 reading for October, above the Dow Jones estimate for 50. The index gauges the percentage of business reporting expansion vs. contraction for the month.

—Jeff Cox

The seasonally adjusted S&P Global Manufacturing PMI came in at 50.4 for October, down from September’s 52 but slightly above the 49.9 expected by Wall Street.

U.S. manufacturers signaled a slight improvement in operating conditions thanks to the easing of supply chain disruptions, but weak demand conditions weighed on growth. New orders fell at the sharpest rate since May 2020.

“Alongside muted domestic demand, new export orders fell sharply as dollar strength and challenging economic conditions across key export markets dampened foreign demand,” S&P Global said in a release.

— Michelle Fox

Stocks opened higher on Tuesday as a new trading month began.

The Dow Jones Industrial Average jumped 212 points, or 0.65%. The S&P 500 and Nasdaq Composite rose 0.8% and 1.2%, respectively.

— Samantha Subin

The new month of trading kicks off Tuesday and if history is any guide, expect solid gains.

“November has historically been one of the strongest months of the year for U.S. stocks,” wrote B. Riley Financial’s Art Hogan in a note to clients Tuesday. “The S&P 500 has experienced an average gain of 0.82% with positive returns 69% of the time, according to data going back to 1983.”

Over the last decade, the S&P has posted a median gain of 1.26% in November and a positive month nine times, Hogan said.

October, he noted, is typically viewed with apprehension given its reputation as the month for stock market crashes, but it tends to outperform during midterm election years.

“Now traders are holding out hope this October will follow a historical pattern of being a ‘bear-market killer’ following a turbulent year for equities,” he wrote.

— Samantha Subin

The better-than-expected revenue report from Uber is giving a boost to some of its gig-economy rivals. Shares of Lyft rose more than 8% in premarket trading, while DoorDash jumped 6.8%.

This group of stocks has underperformed this year, as Wall Street has turned away from growth-oriented companies that struggle to turn a profit and grapple with a tight labor market.

However, Uber CEO Dara Khosrowshahi told CNBC’s “Squawk Box” Tuesday that the company is recovering its driver base. The company also issued a higher-than-expected adjusted EBITDA guide for the fourth quarter.

— Jesse Pound

A slew of U.S.-listed China stocks rose in the premarket on hopes that the country may soon bring an end to its strict zero-Covid policy.

The KraneShares China Internet ETF rose more than 8% in the premarket, putting it on pace for back-to-back gains. In October, the fund suffered its worst month since July 2021, losing 22%.

Shares of Pinduoduo jumped more than 9%, while electric vehicle stock Nio rose 8.3%

The iShares China Large-Cap ETF, which hosts a slew of China-based technology giants such as Alibaba, also rose nearly 6%.

Macau-linked casino stocks were also higher in the premarket, including Las Vegas Sands, Wynn Resorts and MGM.

— Samantha Subin, Nicholas Wells

Shares of the fintech company soared more than 13% in premarket trading after posting a smaller-than-expected loss for the recent quarter.

SoFi Technologies posted a loss of 9 cents a share on $419 million in revenue. Analysts had expected a loss of 10 cents a share on revenues of $393 million.

The company also added roughly 424,000 new members during the quarter, bringing its total members to 4.7 million.

SoFi also upped its revenue outlook for the year

— Samantha Subin

As November kicks off, stocks are exiting one of their best months in history.

All the major averages managed to snap a two-month losing streak while the Dow Jones Industrial Average capped off its best month since January 1976.

Here’s how the major averages fared in October and where they stand as November trading begins:

Dow Industrial Average:

• Finished its best month since January 1976
• Gained 13.95% in October
• Broke a two-month losing streak
• Sits 80.42% off its record low, 11.42% from its record high

S&P 500:

• Gained 7.99% in October
• Snapped a two-month losing streak
• Sits 76.65% off its pandemic low, 19.65% from its record high

Nasdaq Composite:

• Rose 3.9% in October
• Shattered a two-month losing streak
• Sits 32.22% off its record high, 65.7% above its pandemic low

— Samantha Subin, Chris Hayes

Shares of Uber popped 9% in premarket trading Tuesday after the company reported quarterly earnings that beat Wall Street’s expectations for revenue and showed a jump in bookings.

Still, Uber ultimately reported a loss during the quarter of $1.2 billion, or 61 cents per share. Of the loss, $512 was attributed to revaluations of Uber’s equity investments, the company said.

The rideshare company reported revenue of $8.34 billion vs. $8.12 billion expected by analysts, according to Refinitiv.

Gross bookings jumped 26% on the year to $29.1 billion. In addition, CEO Dara Khosrowshahi said that October is tracking to be an even better month for gross company bookings and mobility.

—Carmen Reinicke, Ashley Capoot

Pfizer‘s stock rose 4% in premarket trading after topping analysts’ expectations for the recent quarter on the top and bottom lines and upping its earnings outlook.

Earnings surpassed estimates by 39 cents a share as Pfizer posted EPS of $1.78 on revenues of $22.64 billion.

Pfizer also upped its earnings per share guidance for the year and the lower end of its revenue forecast. The company also upped its sales outlook for its Covid-19 vaccine by $2 billion to $34 billion as it continues to roll out its booster shots. Pfizer maintained its $22 billion revenue forecast for its Paxlovid treatment.

Separately, Pfizer reported positive results from a trial for its respiratory syncytial virus (RSV) vaccine. Data showed the vaccine is highly effective at protecting newborns when mothers receive the shot later in their pregnancy.

— Samantha Subin, Spencer Kimball

Abiomed shares surged more than 47% in the premarket on news that the company is being acquired by Johnson & Johnson for $380 per share in cash. Abiomed shares closed Monday’s session at $252.08 per share.

The deal, according to a release, represents an enterprise value of about $16.6 billion and is expected to close in the first quarter of 2023.

“The addition of Abiomed is an important step in the execution of our strategic priorities and our vision for the new Johnson & Johnson focused on Pharmaceutical and MedTech,” J&J CEO Joaquin Duato said in a statement.

— Fred Imbert

Carvana shares traded more than 10% higher in the premarket after the online car seller was upgraded to neutral from underweight at JPMorgan.

The bank’s Rajat Gupta said investors now have a better handle on the risks surrounding Carvana, noting that the company can better manage its liquidity.

CNBC Pro subscribers can read the full story here.

— Sarah Min

Shares in mainland China and Hong Kong jumped after unconfirmed reports circulated about a committee being formed for reopening discussions in the world’s second-largest economy.

The Shanghai Composite closed 2.6% higher, while the Shenzhen Component Index and Hong Kong’s Hang Seng ended the overnight session up 3.2% and 5.2%, respectively.

Economist Hao Hong of Grow Investment Group tweeted that the rumored committee is reviewing data from multiple countries and aiming for a reopening in March next year.

To be sure, Chinese foreign ministry spokesperson Zhao Lijian told Reuters that he was unaware of the situation.

“I don’t know where you got this information. I truly don’t know anything about this,” Zhao was quoted as saying.

Check out our Asia-Pacific markets coverage here.

– Jihye Lee

European markets are heading for a positive start to the trading session on Tuesday with global investors focusing on the U.S. Federal Reserve’s policy meeting, which begins today. The central bank is expected to hike interest rates by 75 basis points on Wednesday when its meeting concludes.

As for Europe’s opening calls, here they are:

London’s FTSE index is expected to open 31 points higher at 7,135, Germany’s DAX up 80 points at 13,348, France’s CAC up 31 points at 6,304 and Italy’s FTSE MIB up 178 points at 22,696, according to data from IG.

European markets closed higher Monday despite euro zone GDP and inflation data pointing to further pain ahead for the 19-member bloc, with consumer price inflation soaring to a record high in October and growth slowing markedly in the third quarter.

Earnings come from BP, Fresenius and DSM on Tuesday. Data releases include manufacturing purchasing managers’ index figures from the Netherlands, Ireland and Sweden for October.

— Holly Ellyatt

The November Fed meeting kicks off tomorrow.

Many market observers expect the central bank to continue its pattern of 75 basis point interest rate hikes.

“A 75-basis point rate hike on Wednesday should be fully expected, as the unemployment rate is still at a 50-year low and there is nothing to suggest that (Jerome) Powell will soften his stance on fighting inflation,” said Danielle DiMartino Booth, chief strategist at Quill Intelligence. “The stock market surge since the last Fed meeting in mid-September only strengthens Powell’s case for continuing to tighten financial conditions.”

But many will be watching from the statement and question-and-answer segment with Powell, the chair, to see how hawkish the language is around inflation.

Some are expecting future meetings to bring lower interest rate hikes.

“Even more than Powell’s direct ten minute Jackson Hole message, Wednesday’s message will be crucial for market expectations going forward,” said Quincy Krosby, chief global strategist for LPL Financial. “With the question and answer segment, Chairman Powell will need to convince traders and investors alike that the Fed is still resolutely determined to curtail inflation, but that it can be accomplished with a steady dose of lower rates.”

— Alex Harring

Earnings continued to drive the biggest moves in after-hour trading.

Avis Budget Group jumped 2% after the budget car rental company reported per-share earnings of $21.70, above expectations of $14.64 per share, according to Refinitiv.

Stryker dropped 5.5% after it reported a miss on the top line in its latest quarterly results. The company narrowly beat expectations on revenue.

See the full list here.

— Alex Harring