Futures on the Dow and Nasdaq popped 150 to 200 points Sunday evening local time, a sharp reversal from Friday’s carnage. The Dow Jones had shed 650 points on Friday, dragged down by spillover effects from surging crude oil prices. It was the second straight week of losses for the S&P 500 and Nasdaq, leaving traders scrambling to reposition before the upcoming macro shock.
The divergence in institutional sentiment is stark right now. A Bank of America note warns investors are likely to stay risk-off until mid-November, expecting stocks, yields, and the US Dollar to slip as AI-related themes face the brunt of the sentiment shift. UBS pushes back on this defensive tilt, arguing that strong AI demand and attractive bond yields make the current sell-off a buying opportunity rather than a structural break.
Crude oil remains the wildcard, with Brent holding above $115 a barrel. US President Donald Trump stated on Sunday that a decision regarding Iran is nearing, citing two options: "finish them off" or make a deal. That geopolitical tension is directly feeding into the energy premium currently weighing on equity valuations.
This week is the ultimate stress test. The Federal Reserve delivers its rate decision Wednesday night Indian time, with the CME FedWatch tool showing a 90% probability of a hold. Thursday brings the Personal Consumption Expenditure inflation data, advance Q3 GDP estimates, and weekly jobless claims.
Corporate earnings will decide if the market can sustain the rebound. Alphabet and Microsoft report after market hours Wednesday, followed by Amazon on Thursday. The list continues with Visa, Coca-Cola, Boeing, GE Vernova, Intel, Mastercard, and Merck & Co. all reporting quarterly numbers this week.