Morning in New York: stocks switched to correction mode

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

Before the opening of trading on November 4, futures on U.S. indices are down about 1% due to increased uncertainty about further actions of the U.S. Federal Reserve and investors' concerns about overvaluation of stocks. These sentiments have intensified after the statements of Goldman Sachs head David Solomon and Morgan Stanley head Ted Peek at the Global Investment Summit of financial leaders in Hong Kong about the likelihood of stock market correction of more than 10% over the next 12-24 months. According to the speakers, current market valuations require caution.

Against this backdrop, shares of Palantir (PLTR) are losing around 4% in the premarket despite posting a strong quarterly report. The company's revenues grew 63% YoY in the period under review, and management's full-year guidance was raised on the back of robust demand for its AIP artificial intelligence platform. The dynamics of Palantir's quotations during the main session will be closely monitored by market participants as an indicator of general sentiment in the AI sector.

Stock movements during the day will also depend on the tone of comments of the Fed management representatives, as well as on corporate reporting. The key event of the day will be the speech of Michelle Bowman, a member of the Fed's Board of Governors, who has a consistent "hawkish" position. Trading participants are waiting for signals from her about the further course of monetary policy.

Pfizer (PFE), Shopify (SHOP), Uber Technologies (UBER), Spotify (SPOT ), Eaton (ETN), Energy Fuels (UUUU ) and Ferrari (RACE ) will report before the main session opens. After the close of trading, Advanced Micro Devices (AMD), Super Micro Computer (SMCI), Arista Networks (ANET), Asteral Labs (ALAB ), Tempus AI (TEM), Marathon Digital (MARA) and Beyond Meat (BYND ) will release quarterly results.

Futures on US indices show negative dynamics. We assess the balance of risks as negative with increased volatility. We focus on S&P 500 fluctuations in the range of 6765-6890 points (from -1.3% to +0.5% to the previous session's closing level).

- Hims & Hers Health (HIMS) stock is up more than 3% on the premarket. The online healthcare platform reported third-quarter revenue above forecasts, driven by a 21% YoY increase in subscribers.

- Navitas Semiconductor (NVTS) shares collapsed nearly 15% before the opening of the main session as its quarterly revenue and profit fell short of average market expectations, as did its own fourth-quarter outlook.

- Shares of Vertex Pharmaceuticals (VRTX) are down nearly 4% on the premarket, although the company's third-quarter earnings beat analysts' consensus. Concerns in the investment community were triggered by weaker-than-expected sales of the issuer's key cystic fibrosis drug Trikafta. In addition, the updated full-year revenue forecast was in line with the average market benchmarks, while new growth drivers were expected to emerge.

- Quotes of Williams Companies (WMB) before the start of the main session are down more than 3% after the publication of the report, the results of which were below analysts' forecasts. The growth of revenues from gas transportation was offset by an increase in operating and interest expenses, which led to a decline in profits.

Trading on November 3 on the U.S. stock exchanges ended without a single dynamics. S&P 500 added 0.17%, Nasdaq 100 rose by 0.44%, Dow Jones fell by 0.48%, and Russell 2000 lost 0.33%. The market was supported by shares of the "Magnificent Seven" companies. The most active - this time after news of a $38 billion contract with OpenAI - were purchases in Amazon shares (AMZN: +4%). Thanks to this, the consumer staples sector (XLY: +0.94%), as in the previous session, became the leader of growth. Communication service providers (XLC: -1.06%) were the outsiders.

The key macroeconomic event of the day was the publication of the index of business activity in the manufacturing sector (ISM Manufacturing) for October. The main indicator did not meet expectations, falling to 48.7 points with the consensus of 49.6. The decline in activity in the sector is recorded for the eighth month in a row. At the same time, the details of the report leave reasons for optimism. The new orders and employment components improved and price pressures eased. This combination allowed investors to interpret the data in favor of the "soft landing" scenario of the economy.

Pressure on the mood of stock exchange players was exerted by comments of representatives of the Fed's management. Thus, members of the Board of Governors Stephen Miran and Lisa Cook spoke in favor of maintaining a restrictive monetary policy, which reduced estimates of the likelihood of another rate cut in December.

- The big news for the M&A market was the announcement that Kimberly-Clark ( KMB : -14 . 6%) will buy Kenvue (KVUE: +12.3% ) for $48.7 billion, which implies a 46% premium to the previous closing price. At the same time, Kimberly-Clark investors were concerned about the high transaction price and integration risks.

- Shares of Beyond Meat (BYND: -16%) came under heavy pressure as it unexpectedly postponed the release of its quarterly report to November 11. The management explained the move by the need to assess non-cash write-downs related to asset impairment, which was perceived by investors as an extremely negative signal.

- IREN (IREN: +11.5%) shares rose on news of a $9.7 billion contract with Microsoft to provide cloud services for AI infrastructure development.

- At the industry level, a positive for Micron (MU: +4.9%) and other memory chip makers was the news that Samsung postponed DDR5 memory contracts due to demand outstripping supply, driving spot prices up 25% for the week.

- A strong quarterly report and improved full-year outlook caused IDEXX Laboratories (IDXX: +14.8%) to actively increase its stock price. The company exceeded revenue and profit expectations, demonstrating particularly strong results in the pet products segment.

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