Here are five things you must know for Monday, October 11:
1. -- Stocks Futures
U.S. equity futures edged lower Monday, while oil prices extended their recent rally past the highest levels in seven years, as investors prepped for a key week on Wall Street that could define market direction into the final months of the year.
With a global energy crunch boosting inflation forecasts, semiconductor shortages set to last well into 2022 and corporate profits pressured by rising input costs and a tight labor market, investors are recalibrating both their assumptions for global growth and market performance amid the lingering challenges brought on by the global pandemic.
Official data on inflation and retail sales this week, following on from Friday's disappointing jobs report, will provide two key reading on the impact of energy costs and labor shortages, with minutes of the Federal Reserve's September policy meeting guiding investors as to how the central bank may react to all of those factors in the coming weeks.
On top of that, the third quarter earnings season will begin in earnest, with 19 companies reporting this week, including JPMorgan (JPM) - Get JPMorgan Chase & Co. (JPM) Report, Citigroup (C) - Get Citigroup Inc. Report, UnitedHealth (UNH) - Get UnitedHealth Group Incorporated Report and Honeywell (HON) - Get Honeywell International Inc. (HON) Report.
On Wall Street, futures contracts tied to the Dow Jones Industrial Average are indicating a modest 70 point opening bell dip, while the broader S&P 500 is priced for a 13 point move to the downside . Nasdaq Composite futures, meanwhile, are set for a 57 point fall as benchmark 10-year note yields hold at 1.61% in overnight trading ahead of the Columbus Day market closure.
2. -- Oil/Energy
Global oil prices extended their rally into a fifth consecutive week Monday, taking crude prices to the highest levels in seven years, as a global energy crunch continues to ripple through major economies around the world.
Flooding in China has lifted coal prices, already elevated from supply shortages and emissions standards, to record highs, provoking energy switching into crude in order to meet post-pandemic demand. Similar momentum trades are playing out in Europe, where natural gas prices remain near record highs, while OPEC continues to add only marginal amounts of crude to global markets as part of the cartel's long-running pact to limit production.
WTI futures for November delivery $1.92 higher to start the session at $81.27 per barrel while Brent contracts for December, the global pricing benchmark, were up $1.62 at $84.01 per barrel.
Natural Gas futures for delivery on October 27, which traded at a 2008 high of $6.466 per million British thermal units (mmBtu) last week, eased to $5.775 in early New York dealing.
3. -- Goldman/GDP
Goldman Sachs cuts its forecast for U.S economic growth over the weekend, citing a "longer lasting virus drag on virus-sensitive consumer services" and the impact of an extended shortage in global semiconductors.
Goldman trimmed its 2021 growth forecast by 10 basis points, to 5.6%, while lowering its 2022 estimate by 40 basis point to 4%, adding that consumer spending is likely to be held back by pandemic uncertainty and a softer-than-expected fiscal response from the Biden administration.
“After updating our estimates of the key growth impulses that drive our consumption forecast -- reopening, fiscal stimulus, pent-up savings, and wealth effects -- and incorporating a longer-lasting virus drag on virus-sensitive consumer services spending, we now expect a more delayed recovery in consumer spending,” said chief economist Jan Hatzius.
4. -- Earnings Week
The third quarter earnings season kicks in to full gear this week with around 20 S&P 500 companies reporting September quarter profits and investors focused firmly on profit projections for the final months of the year.
Collective S&P 500 profits are expected to rise 29.6% from last year to around $413.8 billion, according to forecasts from Refinitiv,. The energy sector is expected to lead gains over Q3, with profits rising by nearly 1500% from last year to around $20.5 billion.
JPMorgan, Citigroup, Goldman Sachs GS and Morgan Stanley will highlight updates from the financial sector this week, with Dow components Honeywell (HON) - Get Honeywell International Inc. (HON) Report, Walgreens Boots (WBA) - Get Walgreens Boots Alliance Inc Report and UnitedHealth Group (UNH) - Get UnitedHealth Group Incorporated Report also providing September quarter updates.
Rising input costs, a tight labor market and weakening consumer demand are likely to hit profit forecasts across all sectors, however, leading to a weaker-than-expected series of outlooks from bluechip comapnies over the coming weeks, with the overall earnings growth rate slowing to around 22.2% over the fourth quarter
5. -- Southwest
Southwest Airlines (LUV) - Get Southwest Airlines Co. Report shares slumped lower Monday amid reports that the carrier will extend cancellations, which grounded nearly a third of its fleet on Sunday, into the start of the week.
Southwest said the cancellations, which comprised around 30% of its Sunday flights, were linked to bad weather in Florida and "air traffic control issues", the Dallas-based carrier said in a statement. Staff shortages linked to vaccine mandates were also reported to have affected Southwest's weekend schedule, which included cancellations of around 28% of its Saturday flights.
"ATC issues and disruptive weather have resulted in a high volume of cancellations throughout the weekend while we work to recover our operation," Southwest said. "We appreciate your patience as we accommodate affected Customers, and Customer Service wait times are longer than usual."
Southwest Airlines shares were marked 1.8% lower in pre-market trading Monday to indicate an opening bell price of $52.95 each. .