Morning in New York: political crisis at the center of the agenda

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

The focus of attention of the trading participants on November 7 will be the development of the situation with the U.S. federal government shutdown, which has been going on for 37 days. The Senate will hold another vote on short-term funding. Democrats demand guarantees on health care subsidies, while Republicans insist that government agencies should be reopened first. The main risks are the expected 10% reduction in airline flights and the end of food stamps for the poor. This could have a negative impact on airlines and consumer spending. Continued political uncertainty puts additional pressure on the market.

Exchange players will continue to follow the comments of the Fed leadership. Today, Christopher Waller, member of the Board of Governors, will speak at the Bank of Canada conference, John Williams, President of the Federal Reserve Bank of New York, will take part in the ECB's Money Markets Forum in Frankfurt, and Philip Jefferson, Deputy Chairman of the regulator, will present his position at the Euro20+ event. Any guidance on the outlook for monetary policy and economic forecasts could affect investor sentiment and increase intraday volatility.

This Friday will see the release of preliminary consumer sentiment index data from the University of Michigan for November (consensus: 53 points, October: 53.6). A decline in the index may increase concerns about the state of the consumer sector amid the ongoing political crisis. Due to the ongoing shutdown, the release of the Labor Department's report for October, which includes data on the number of new jobs outside of agriculture (non-farm payrolls) and an assessment of unemployment dynamics, has been postponed indefinitely.

Constellation Energy (CEG), KKR (KKR), EOG Resources (EOG), Duke Energy (DUK ), Fluor (FLR ) , Enbridge (ENB) and CNH Industrial (CNH ) will present quarterly results before the open.

Futures on US indices demonstrate positive dynamics. We assess the balance of risks as neutral with an average level of volatility. We focus on S&P 500 fluctuations in the range of 6690-6780 points (from -0.5% to +0.9% to the previous session's closing level).

- Nvidia (NVDA) is facing new restrictions: the White House has banned shipments of a simplified version of B30A AI chips to China, despite samples already provided to customers. Beijing requires local companies to use only domestic processors in state-funded data centers. NVDA shares remain under pressure against the backdrop of increased export restrictions and actual loss of access to the Chinese market.

- Tesla (TSLA) shareholders approved for Elon Musk the largest compensation package in history of up to $1 trillion, tied to the achievement of ambitious goals to produce cars, launch robotaxis and increase the company's capitalization. Quotes of the carmaker are moving upward before the opening of the main session.

- The streaming services Apple TV, Apple Music and Apple Arcade experienced a brief technical failure on the evening of November 6, affecting the US audience. At the peak, the number of user requests reached 15 thousand. The services were promptly restored. The incident did not have a noticeable impact on Apple (AAPL) quotations.

- Comcast (CMCSA) has engaged Goldman Sachs (GS) and Morgan Stanley (MS) to evaluate the takeover of Warner Bros Discovery 's (WBD) studio and streaming business. Netflix (NFLX) is also interested in the assets, having brought in Moelis & Co (MC) to explore the prospect of a deal. Shares of Warner Bros Discovery on this background show increased volatility.

- John Deere (DE) signed a $3-5 billion agreement with Kazakhstan to produce agricultural machinery, and also signed a $300 million contract with Uzbekistan. The strategic partnership provides for the production of 3,000 machines over five years and the establishment of three service centers.

Trading on November 6 on the U.S. stock exchanges ended in the negative. S&P 500 lost 1.12%, Nasdaq 100 fell by 1.91%, Dow Jones fell by 0.84%, and Russell 2000 - by 1.86%. The reasons for the sell-offs were the flight from risk caused by ambiguous signals of companies related to artificial intelligence, as well as profit taking in high-tech segments. Manufacturers of cyclical consumer goods (XLY: -2.31%) were the outsiders. The energy sector (XLE: +0.97%) emerged as the growth leaders. Most securities of the "Magnificent Seven" traded on the negative territory. Nvidia (NVDA: -3.65%) was under the strongest pressure. Alphabet (GOOGL: +0.21%) remained in the green.

Investors were again focused on the cost and ROI of artificial intelligence, with increased attention to capital efficiency after skeptical comments from market participants and a weakening of Oracle's (ORCL) position. Despite this, news of a $400 million contract between Snap (SNAP) and Perplexity AI was welcomed positively.

According to Challenger, in October the number of announced layoffs in the U.S. almost tripled to the level of the same period in 2024 and exceeded 150 thousand, becoming the maximum in more than 20 years. More than 1 million jobs have been cut since the beginning of the year. In this regard, concerns about the worsening situation in the labor market are growing.

On Thursday, a large volume of important corporate reports was released. When assessing them, the focus shifted from absolute results to the market's reaction to forecasts and expectations. Many companies presented strong indicators, but it did not cause a pronounced positive dynamics of their securities.

- Strategic revision of financial targets supported the growth of Bank of America (BAC: +1.6%) quotations.

- Robinhood (HOOD: -10.8%) reported better than expected, but news of rising costs and a change in CFO caused widespread profit taking in its shares.

-Parker-Hannifin (PH: +7.8%) reported strong results for its fiscal first quarter. Management raised its full-year guidance for revenue, operating margin and profit, emphasizing strong demand in the aerospace segment and recovery in the industrial sector.

-Coherent (COHR: +18.3%) showed improved performance in its AI, data center components, and industrial segments. The company's own forecast was above average market expectations.

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