Market News by OnEquity

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Today’s Stocks to Watch: Boeing, Kenvue, and Humana
Key points:

• Humana stock increased due to rumors of a possible acquisition by Cigna.
• Starboard Value bought a stake in Kenvue, boosting its stock value.
• Boeing reached an agreement in principle that could end the strike.

Boeing (BA) Moves Toward Ending the Strike​

Boeing has reached a tentative agreement with the machinists’ union, which could end the strike that has paralyzed much of its production. Boeing shares rose more than 3% in pre-market trading, reflecting the positive impact of the agreement on its valuation. This move is crucial for the company, which had experienced significant delays in its production line due to the strike. Investors are closely watching developments in the negotiation, as it could have long-term implications for Boeing’s operational strength.

Kenvue (KVUE) Rallies After Starboard Value’s Stake Purchase​

Kenvue saw a gain of more than 5% in pre-market trading after Starboard Value, an activist investment fund, bought a sizable stake in the company. Starboard intends to implement changes to boost Kenvue’s share price. Kenvue, which spun off from Johnson & Johnson last year, has sparked optimism among investors, who hope these proposed changes will improve the company’s near-term profitability. Kenvue remains a key player in the consumer products sector, and this development could mark a turning point in its financial trajectory.

Humana (HUM) Rises on Strong Cigna (CI) Acquisition Rumors​

Humana is up more than 4% in pre-market trading, following Bloomberg reports that Cigna Group has revived its efforts to acquire its rival. These rumors have generated strong interest in Humana shares, as a merger with Cigna could solidify its position in the health insurance market. Investors are closely watching for progress in these talks, as a potential buyout could reshape the competitive landscape of the U.S. healthcare sector.

Walmart (WMT) Reaches Opioid Settlement​

Walmart has announced a preliminary settlement of three shareholder lawsuits related to opioid distribution. While the immediate effect on the stock was minimal, this settlement is a significant breakthrough in the company’s ongoing legal battles. Resolving these lawsuits could relieve Walmart of substantial legal burdens, allowing the company to focus its resources on growth and expansion.

Upcoming Earnings Reports​

SAP (SAP) is one of the companies set to release its results after the market closes. Other companies reporting earnings this week include General Motors (GM) on Tuesday, Tesla (TSLA) and IBM (IBM) on Wednesday, and United Parcel Service (UPS) on Thursday. Investors will be closely watching these reports, as they could provide a clearer picture of these companies’ performance in a challenging economic environment.

 

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Dollar falls, euro rises on ECB speakers expectations
The U.S. dollar declined on Tuesday, although it remained near its recent highs in an environment marked by uncertainty related to the pace of interest rate cuts as the date for the U.S. presidential election approaches.

The dollar benefited from rising yields​

The dollar retreated slightly on Tuesday, although it benefited from a rise in the yield on 10-year U.S. Treasury bonds, which rose to a 12-week high.

On Monday, four Federal Reserve policymakers favored further interest rate cuts, following the Fed’s decision to cut borrowing costs by about 50 basis points in September.

However, the comments from these officials seemed to signal some lingering disagreement over the pace of the cuts.

Three of them stated that a “modest” or “gradual” rate cut may be warranted as a result of the uncertain outlook, although there is still continued resistance from the U.S. economy, while San Francisco Fed President Mary Daly noted that rates remain “very tight,” adding that a strong economy should not preclude further cuts. N

The dollar has also been helped by demand for safe-haven assets, as investors are currently risk-averse with the 2024 presidential election just two weeks away.

“Our perception is that the magnitude of bond and currency movements is being exacerbated by some deleveraging ahead of the U.S. election,” ING analysts said in a note. “The path should be a stronger dollar if FX liquidity conditions in fact worsen through Nov. 5.”

Euro gains ahead of ECB speeches.​

In Europe, EUR/USD rose 0.2% to 1.0833 in anticipation of a series of speeches from European Central Bank officials following the latest rate cut.

“It is quite usual for ECB members to adjust the policy message in the aftermath of a rate decision,” ING reported. Naturally, if we see signs of resistance to easing from hawks like Knot and Holzmann today, expect the euro to feel some additional pressure.” Yesterday, hawkish member Kazimir mentioned that the December decision is “wide open”, a rather bearish change from his comments prior to the October meeting.”

GBP/USD rose 0.2% to 1.3003 after data revealed that UK government borrowing increased by £2.1 billion compared to September last year to £16.6 billion, the highest for a September since records began in 1993.

The Bank of England is poised to cut interest rates in the coming months to stimulate the UK economy, although the data highlight the UK’s complex financial situation ahead of next week’s budget.

Yen weakness on political change​

The USD/CNY rose 0.1% to 150.91, trading slightly below its highest level since late July.

The yen’s weakness was due to the change in the top of Japan’s government, which raised doubts about whether the Bank of Japan would be able to continue raising rates. The new Prime Minister, Shigeru Ishiba, explicitly stated that Japan’s economy could not withstand further rate hikes.

USD/CNY rose 0.1% to 7.1214, approaching two-month highs, after the PBOC cut its benchmark prime lending rate on Monday.

 

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U.S. stock markets pull back; large volume of third-quarter results expected
Stock index futures along with U.S. equities were lower on Tuesday, with eyes on the third quarter results of a number of large companies.

Most major Wall Street indexes posted a slightly negative session on Monday, with the Dow Joanes index down 0.8%, ending three straight sessions of gains. The S&P 500 index lost 0.2% while the Nasdaq Composite lost about 113 points, about 0.6%.

A flurry of Q3 results​

The results of a large number of U.S. companies will be released on Tuesday.

About one-fifth of the S&P 500 index is scheduled to report results this week, and so far about 14% of the companies in the broad index have reported results, with more than 7 out of 10 beating earnings forecasts, according to FactSet.

Chipmakers Texas Instruments (TXN) and Seagate Technology (STX) will be joined by defense companies GE Aerospace (GE), Rtx Corp (RTX) and Lockheed Martin (LMT), plus with teleco Verizon Communications (VZ), miner Freeport-McMoran (FCX), industrial giant 3M Company (MMM) and automaker General Motors (GM).

Electric car maker Tesla (TSLA) will unveil its results on Wednesday and is the top-ranked company of the week, while other major Wall Street stocks, such as AT&T (T), International Business Machines (IBM), Bank of America (NYSE:BAC) and Coca-Cola (KO), will also report their results on Wednesday.

Additionally, SAP (SAP) shares rose nearly 4% ahead of the market open after the German software company raised its full-year guidance on the back of a strong cloud business in the third quarter, while Zions Bancorporation (ZION) gained nearly 3% on the back of strong earnings.

IMF and Fed in the spotlight​

The International Monetary Fund is expected to update its estimates for the global economy later in the day on Tuesday, and investors will also be on the lookout for more statements from the Federal Reserve, as FOMC member Patrick Harker will speak during the session.

Four Fed policymakers on Monday backed further rate cuts following the central bank’s decision to cut borrowing costs by 50 basis points in September.

However, the comments from these officials seemed to signal some continued disagreement over the pace of the cuts.

The U.S. presidential election is still in the spotlight, with GOP candidate Donald Trump gaining ground on Vice President Kamala Harris, according to the latest polls, with two weeks to go before the vote.

Crude oil rebounds, but demand fears continue​

Oil prices reversed past losses on Tuesday, although a large amount of uncertainty clouds global demand growth, especially in major crude importer China.

International Energy Agency head Fatih Birol said Monday that China’s economic weakness continued to dampen global oil demand in the coming years.

Birol’s comments, in an interview with Bloomberg, came after both the International Energy Agency and the Organization of the Petroleum Exporting Countries recently cut their demand growth forecasts because of concerns about China.

However, tensions in the Middle East continue to support the crude oil market, as traders fear that an escalation of the conflict between Israel and Hamas and Hezbollah could significantly impact supply in the oil-rich region.