Morning in New York: Chances of a Post-Election Rally Remain

A daily review and forecast of events in the U.S. stock market by Mikhail Denislamov, Deputy Director of Capital Markets Research at Freedom Broker.

The main issue for the upcoming session will be the sustainability of growth outside the tech sector. The focus will be on companies in the financial and consumer sectors, which were among the leaders in recent trading. If the positive momentum in these stocks continues amid weakness in the semiconductor sector, the broader market will remain supported ahead of Friday’s jobs report.

Earnings reports from Advanced Micro Devices (AMD), Arista Networks (ANET), and Super Micro Computer (SMCI) pointed to strong demand for data center equipment. At the same time, potential restrictions on the construction of new facilities increase the risk of order delays. In its quarterly earnings release, Qualcomm (QCOM) noted a slowdown in demand for smartphones amid rising memory chip prices. Shares of memory chip manufacturers in Japan and South Korea declined during trading on November 5.

WTI crude is trading just below $88 per barrel due to easing concerns about an escalation of the U.S.-Iran conflict and the resumption of supplies from the Middle East. According to J.P. Morgan, the global oil market surplus reached 1.4 million barrels per day in October. A further decline in fuel prices could ease pressure on transportation companies’ costs and support consumer demand.

At 8:30 a.m. Eastern Time (ET), the weekly unemployment insurance claims data will be released (consensus estimates for initial and continuing claims: 196,000 and 1.71 million, respectively, following 194,000 and 1.701 million the previous week). If the increase in continuing claims turns out to be higher than expected while initial claims remain stable, this would indicate a slowdown in job creation, which is important ahead of the release of the Department of Labor’s October report.

Data on labor productivity and unit labor costs for the third quarter will also be released. Market consensus estimates suggest that the former will accelerate from 1.4% to 2.7%, while the latter will slow from 1.2% to 0.4% on a year-over-year basis.

At 8:50 a.m. ET, Beth Hammack, president of the Federal Reserve Bank of Cleveland—who voted in favor of a rate hike in October—will participate in a discussion on stablecoins and safe-haven currencies. At 9:10 a.m. ET, Thomas Barkin, president of the Federal Reserve Bank of Richmond, will deliver an assessment of the economy.

Before the main session opens, ConocoPhillips (COP) and Cigna (CI) will report their earnings. After the market closes, Cloudflare (NET) and Airbnb (ABNB) will present their quarterly results.

S&P 500 futures are trading near zero, while Nasdaq-100 contracts are showing a sharp decline. The correction in oil prices is supporting the broader market, while pressure persists in the semiconductor sector. We assess the risk balance for the upcoming session as neutral, with average volatility.

— Qualcomm (QCOM) shares fell by about 7.5% following the release of its latest quarterly results, in which revenue from smartphone chips declined 26% year-over-year, to $5.14 billion, compared to a consensus estimate of $5.25 billion. Shipments were pressured by weak demand and a decline in revenue from Apple (AAPL). For the current quarter, Qualcomm’s management forecasts $650 million in revenue from data center solutions, compared to a market consensus of $539 million. This guidance no longer includes sales to Apple.

— Arm Holdings (ARM) shares fell by about 1.7% after the market closed yesterday. The company’s royalty revenue in the data center segment doubled year-over-year, but total revenue from this segment amounted to only $670 million, falling short of the consensus estimate of around $721 million.

— Coherent (COHR) shares rose about 5% following the release of its earnings report. The company’s revenue from its data center and communications segments increased 79% year-over-year. The company also announced a five-year agreement to supply PhotonLink optical solutions, valued at approximately $20 billion. This contract provides a benchmark for demand over the next several years. The company expects to begin generating revenue from this agreement starting in early 2028.

— AppLovin (APP) shares soared nearly 23% as its third-quarter revenue rose 55% year-over-year to $2.18 billion, and the company forecasts revenue in the range of $2.365–2.395 billion for the next three months, compared to the market consensus of $2.25 billion. The midpoint of that range implies a quarter-over-quarter increase of approximately 9%. In addition, the board of directors expanded the limit on the share repurchase program by $3.2 billion, to $3.6 billion.

— MercadoLibre (MELI) shares fell by approximately 6.4% in after-hours trading. The company’s revenue and financial income for the last quarter rose 45% year-over-year to $10.75 billion, but operating profit fell 6% to $676 million. Delivery costs, expansion of logistics capacity, and marketing expenses had a negative impact on margins.

Trading on November 4 on U.S. stock exchanges ended in positive territory. The S&P 500 gained 1.58%, the Nasdaq-100 rose 0.91%, the Dow Jones climbed 3.03%, and the Russell 2000 gained 1.58%. Following the midterm elections, the Democrats secured a majority in both chambers of the new Congress. Following U.S. President Donald Trump’s statement that there were no plans for new strikes against Iran in the near future, December WTI futures fell 8.3% to $88.1 per barrel. The yield on 10-year Treasuries fell by approximately 6 basis points to 4.89%. The correction in hydrocarbon prices put pressure on the energy sector (−4.74%). This same factor, combined with lower yields on debt instruments, improved the outlook for cyclical consumer goods suppliers (+4.26%). The financial sector was also among the top performers (+3.51%).

The number of stocks in the S&P 500 that rose was about three times the number that fell.

Another positive sign came from the ADP data, which showed that private-sector job growth in October rose by 86,000, compared with a consensus estimate of 69,000. Meanwhile, the September figure was revised downward from 90,000 to 86,000. The ISM Services Purchasing Managers’ Index (PMI) fell from 54.9 to 54.5 points, compared with average expectations of 54.8 points. The price component fell from 74 to 73 points, remaining high. The U.S. Treasury presented a quarterly debt issuance plan totaling $125 billion, of which approximately $28 billion represents net borrowing.

In the technology sector, performance was mixed. Shares of Microsoft (MSFT) and Amazon (AMZN) rose 6.7% and 6.1%, respectively, while the SOX semiconductor index fell 3.1%. Investors were assessing the risk of stricter regulations on data center construction following the election. Most market participants believe that a slower rollout of new capacity will increase the value of existing facilities and mitigate the negative impact of capital expenditures on cloud companies. For equipment suppliers, this scenario carries the risk that some orders will be postponed to a later date.

This article was AI-translated and verified by a human editor