Market Snapshot: U.S. stocks mostly higher as investors await midterm elections, inflation data

What’s driving markets

Stock investors are looking ahead to Tuesday’s midterm elections with an upbeat attitude, assessing headlines over the potential for eventual talks between Russia and Ukraine, and bracing for the next major U.S. inflation update this week.

Read: What midterms mean for the stock market’s ‘best 6 months’ as favorable calendar stretch gets under way

Markets moved on Monday “with some anticipation of the midterm elections tomorrow and we know there’s a very, very high chance that Republicans will take at least one chamber of Congress, which will be positive for markets,” said Dan Eye, chief investment officer at Pittsburgh-based Fort Pitt Capital Group, which oversaw $4.2 billion in assets as of September.

In addition, “there were a number of headlines out this weekend about the possibility on the part of NATO to get Russia and Ukraine to the table at some point,” Eye said via phone.

Over the weekend, the Washington Post reported that the Biden administration was privately encouraging Ukraine’s leaders to signal an openness to negotiate with Russia and to drop their public refusal to participate in talks unless Russian President Vladimir Putin is removed from power.

“And maybe with the Fed meeting behind us, there’s more clarity on rate hikes than there was a week ago,” Eye said. “We now know policy makers are thinking that as early as December they could slow the pace of interest hikes and that the terminal rate will probably go higher than thought in September, but markets have priced a lot of that in.”

“We still have this big inflation report on Thursday and know that if the market moves the other way and things turn south, it’s because investors are looking to position conservatively ahead of the well-anticipated CPI (consumer-price index) report,” he said.

Last week, the Fed delivered a 75-basis-point, or three-quarters of a percentage point, increase in the fed-funds rate, as expected. However, Chairman Jerome Powell emphasized that rates would need to move higher than Fed officials had previously expected and signaled borrowing costs may remain elevated.

Cleveland Fed President Loretta Mester and Boston Fed President Susan Collins were due to speak Monday afternoon, while Richmond Fed President Tom Barkin was scheduled to deliver remarks on inflation in the evening.

Barkin and Collins both spoke publicly on Friday. Barkin argued for slowing the pace of rate hikes, but like Collins and Fed Chair Jerome Powell, signaled that it’s unclear just how high rates will have to go to squelch inflation. By the time the Fed gathers for its December policy decision, it will have seen two more consumer prices reports, the first set to be released this Thursday.

The Dow’s jump in Monday afternoon trading was led by gains on shares of Walgreens Boots Alliance Inc.
WBA,
+3.74%
and Boeing Co.
BA,
+3.21%.
Meanwhile, a positive turn for Asian markets provided some support overseas, analysts said: The Hang Seng
HSI,
+2.69%
finished up by 2.7%.

Chinese leaders are weighing steps toward reopening after nearly three years of tough pandemic restrictions but are proceeding slowly and have set no timeline, The Wall Street Journal reported Monday, citing people familiar with the discussions.

However, shares of Apple Inc.
AAPL,
-0.62%
were down 0.7% after it warned of problems with the production of the iPhone 14 in China.

See: Will Apple’s latest production issues destroy demand?

Through Friday, 85% of companies in the S&P 500 had reported third-quarter results. Of those, 73 had issued fourth-quarter guidance, and 50 of those — 68% — missed expectations with their holiday guidance, higher than the 5- and 10-year historical averages, FactSet senior earnings analyst John Butters said in a note.

The S&P 500 is now expected to report a year-over-year earnings decline in the fourth quarter, after forecasts from the current earnings season sent expectations from a 0.2% gain to a 1% decline last week, according to FactSet. Should that forecast hold, along with expectations for growth in the third quarter, it would break an eight-quarter pandemic-era streak of earnings gains.

Earnings Watch: The end of the pandemic earnings boom is in sight as holiday forecasts disappoint

See also: S&P 500 earnings estimates for 2023 take ‘complete U-turn’ as recession risks loom, according to BofA

Companies in focus

• Class A shares of Facebook parent Meta Platforms Inc.
  META,
  +4.69%
  rose 4.1%. The Wall Street Journal reported the company plans to start large-scale layoffs this week — the first major cuts in the company’s 18-year history.

• VillageMD announced Monday an agreement to buy urgent-care provider Summit Health-CityMD in a deal valued at $8.9 billion, with help from investments from Walgreens Boots Alliance Inc.
  WBA,
  +3.74%
  and Cigna Corp.
  CI,
  +0.69%
  affiliate Evernorth. As part of the deal, drugstore and healthcare services company Walgreens will invest $3.5 billion worth of equity and debt, and will remain the largest shareholder of VillageMD with 53% ownership. Walgreens Boots shares were up 3.9%.

• Palantir Technologies Inc.
  PLTR,
  -12.42%
  came in just above expectations with its latest quarterly revenue performance, while raising its outlook on an earnings metric Monday. Palantir posted adjusted earnings per share of 1 cent, whereas analysts were expecting 2 cents. Shares fell 13%.

–— Jamie Chisholm contributed to this article.