Even though Apple (AAPL) warned about slow iPhone 14 Pro sales due to supply chain issues in China, and Meta Platforms (META) indicated that it is planing large layoffs, futures are indicated higher in the premarket.
China continues to indicate that it is 'unswervingly' dedicated to its Covid Zero policy which is impacting Apple, but Apple says that demand remains strong, which has prevented any major selling pressure so far this morning.
The market appears to be adjusting to the surprise Fed interest rate decision last week and is building support. The market was hoping for a clear signal that the rate hike in December would drop to 0.5%, but the Fed changed the focus and is now indicating that, ultimately, interest rates are likely to go higher than previously thought, but the process of hiking will be slower and more methodical.
Market players appear to like the idea of a slower pace of rate hikes and are willing to take the risk of more hikes down the road because it adds a little bit of certainty to the process and allows the Fed to more accurately evaluate that its policy is working.
Currently, Fed Fund Futures indicate that there is about a 57% chance of a 0.5% hike and a 43% chance of a 0.75% hike in December. Those odds are going to change this week as we hear from a steady parade of Fed speakers and deal with the CPI report on Thursday.
CPI is going to be the bigger market mover this week, and we'll have to see how things develop into the news. Currently, the expectations are that CPI will show some slowing but will remain elevated. The market has been overly optimistic the last few months about inflation dropping, and the chances of a negative surprise are not insignificant.
The other market-moving news this week will be the election results that hit on Wednesday. There are expectations of a very strong showing by Republicans, and that is generally viewed as a market positive. The main sector that will benefit is oil and energy, and they have already been running up.
The big question about the election is whether it will produce a surge in positive sentiment. While the market has already discounted the news to some degree, there is still uncertainty about the Senate, and we will have to see if there is any drama over the vote-counting process.
Technically, big-cap technology stocks have been the major market laggard lately, and that is not bad news. These stocks were the last to top, and it makes sense that they will be the last to bottom. They have hidden much of the bear market from view for a very long time, but now they are finally closing the gap, and that may be what is needed to help create support for the many stocks that have been crushed over the past year.
We have upbeat action on Monday despite some negative news and uncertainty about CPI, and that is going to attract some buyers if it can hold for a while.