- Risk appetite fell significantly as market participants awaited the midterm elections.
- Equities plunged on Friday, with the tech-heavy Nasdaq leading the decline.
- Secretary of State Marco Rubio said Trump was planning to end the Iranian war using diplomacy.
Equities extended declines on Tuesday as investors awaited the outcome of the US midterm elections. Stocks collapsed on Friday, ending October down as the tech sector suffered after a set of downbeat earnings reports. The only thing putting a floor on declines was the hope that talks between the US and Iran would resume.
Nasdaq 100 performance (Source: Bloomberg)
Risk appetite fell significantly as market participants awaited the midterm elections. As a result, money was flowing out of risky assets like equities and into safer ones like bonds. The uncertainty surrounding the outcome of the elections will likely keep investors away. Moreover, the outcome will influence policy decisions in the country and how much power Trump has.
Meanwhile, equities plunged on Friday, with the tech-heavy Nasdaq 100 leading the decline. Notably, Amazon’s earnings results missed Wall Street’s estimates, sending the stock down over 1%. Other big names that disappointed last week include Alphabet, Intel, and Sandisk. The decline extended to chipmakers like Nvidia. Meanwhile, outside of tech, companies like Coca-Cola gained.
This week, market participants will focus on more corporate earnings reports. Furthermore, developments in the Middle East will keep shaping market sentiment. Oil prices dropped on Monday after reports that Secretary of State Marco Rubio said Trump was planning to end the Iranian war using diplomacy.
The good news came after reports last week that US Vice President JD Vance sent a letter to Iran in the hopes of restarting talks. If this is the case, the global market will breathe a sigh of relief. Initially, Trump had told Gulf nations to prepare for an intense military campaign in Iran soon after the elections.
Talks would rekindle hopes for a peace deal, sending oil prices lower. Subsequently, inflation worries would ease, relieving pressure on the Fed to hike interest rates. The shift to a hawkish stance has dimmed the outlook for the AI sector, which depends heavily on borrowed money. Therefore, such an outcome would boost AI stocks.
Elsewhere, traders are looking forward to the US non-farm payrolls report. Economists predict an addition of 65,000 jobs in October compared to the previous month’s 29,000. Meanwhile, they expect the unemployment rate to hold steady at 4.2%.