U.S. stock futures surge on AI optimism, while Kimberly-Clark tumbles post-Kenvue deal
Wall Street futures saw a positive start to November, driven by the optimism surrounding AI demand and a U.S.-China trade truce. However, the market took a downturn as Kenvue shares soared following Kimberly-Clark's acquisition announcement.
Kenvue's shares skyrocketed by 21% in premarket trading after Kimberly-Clark revealed its plans to acquire the Tylenol manufacturer for approximately $48.7 billion. In contrast, Kimberly-Clark's stock price dropped by 14.4%.
The S&P 500 benchmark achieved its sixth consecutive monthly gain in October, marking its longest such streak in four years. Similarly, the tech-heavy Nasdaq logged its longest monthly gain in over seven years, attributed to the 'Magnificent Seven' companies' earnings reports indicating a surge in AI spending.
As the week progresses, investors eagerly await earnings reports from semiconductor firms like Advanced Micro Devices and Qualcomm. UBS Global Wealth Management analysts noted the strong cash positions and healthy balance sheets of these tech giants, suggesting that their higher capital expenditures will further boost AI momentum.
U.S. President Donald Trump's decision to reserve Nvidia's advanced chips for U.S. companies and restrict their export to China and other nations further fueled AI optimism, causing Nvidia shares to rise by 2%.
Despite a one-year delay in reciprocal tariffs agreed upon by Trump and Chinese President Xi Jinping, the underlying tensions between the two economic superpowers persist.
Market indices opened higher on Monday, with the Dow E-minis up 13 points, S&P 500 E-minis up 24.5 points, and Nasdaq 100 E-minis up 171.25 points. However, the focus shifts to private sector economic data this week, with the second-longest U.S. government shutdown contributing to data fog and monetary policy uncertainty.
The ADP's private payrolls data on Wednesday will be closely monitored, especially after Fed Chair Jerome Powell's recent comments and the central bank's decision to cut interest rates.
The Institute for Supply Management's U.S. manufacturing gauge for October is also scheduled for Monday. Traders anticipate a 69.3% chance of a 25-basis-point rate cut in December, down from 90% a week earlier.
The U.S. Supreme Court is set to hear a case regarding the legality of Trump's tariffs on Wednesday. Additionally, Berkshire Hathaway's Class B shares rose by 1% after Warren Buffett's conglomerate reported higher profits for the third quarter.
Data storage companies gained after Samsung delayed its DDR5 contract pricing to mid-November. Seagate Technology and Western Digital each rose by 1.8%, while Sandisk increased by 5.6%.
IREN shares surged by 22% after the data center operator secured a nearly $9.7 billion contract with Microsoft for access to Nvidia's GB300 processors over five years.
In Europe, the STOXX 600 share index rallied 0.4% during a week of heavy earnings reports.
Investors are now relying on private-sector employment and labor components of business activity surveys, as the usual monthly U.S. jobs report is unavailable in the first week of the month.
Deutsche Bank strategist Jim Reid noted that the absence of government data releases will likely draw attention to ADP's private payrolls report, especially after Fed Chair Powell's hawkish press conference.
The Federal Reserve's interest rate cut last week was expected, but Chair Jerome Powell emphasized that another cut in December is not guaranteed, contrary to investor expectations.
Despite a buoyant market mood, some analysts caution that positive factors like the trade truce between Washington and Beijing may already be fading.
In Asia, October data revealed that major manufacturing hubs struggled due to weak U.S. demand and Trump's tariffs, impacting factory orders across the region.
BofA strategists advised investors to lock in gains during rises, accumulate during corrections, and adopt a more defensive positioning towards year-end.
A group of Fed officials expressed discomfort with the central bank's interest rate cut decision, while influential Fed Governor Christopher Waller advocated for further policy easing to support the weakening labor market.
Traders now predict a 68% chance of a rate cut in December, down from near-certainty before the Fed meeting.
The dollar has been recovering from its year-to-date losses, gaining 2% in October and approximately 7.9% against a basket of six currencies since September. The euro weakened to three-month lows, while sterling and the yen also declined.
As the week progresses, the focus will shift to the technology sector, with earnings reports from semiconductor firms Advanced Micro Devices, Qualcomm, and data analytics company Palantir Technologies, along with Uber and McDonald's.
In commodities, gold surpassed US$4,000, and Brent crude futures rose by 0.32% to US$64.98 per barrel after OPEC+ decided to refrain from increasing output in the first quarter of next year.
