ES: Midterms, Apple Slide and Oil Rebound Ahead of AMD and JOLTS

Key Takeaways

• Midterm elections today. Prediction markets give Democrats roughly a 75% chance of taking the Senate and 95% the House. JPMorgan sees a "blue wave" as the most likely outcome (66%) and pairs it with an S&P 500 reaction of between -0.25% and +0.5%, with a risk of selling in AI names. A split Congress is seen at +0.5/+1%, a red wave at +1/+1.25%. Results will come in after the close: today's session is mostly about positioning ahead of the vote.
• Apple (AAPL) is down 4.5% premarket, at $323.48. The reason: gross margin guidance of 45% to 46% for the December quarter, below the expected 46.3%. With a weight of about 7%, that mechanically shaves nearly 0.3 point off the S&P 500.
• Oil is climbing again. Brent is up 1.7% above $106 after Monday's 7.6% plunge. The Wall Street Journal reports a U.S. strike on the Iranian island of Qeshm, in the Strait of Hormuz. That is negative for rates and inflation expectations, positive for the energy sector.
• Tech remains at the center of the stress. The Nasdaq-100 lost 1.39% on Monday and sits more than 10% below its high, in technical correction territory. The S&P 500 fell 0.51% to 7,541.40 while the Dow gained 0.41%. Advanced Micro Devices (AMD) reports tonight, with an options-implied move of about 10.85%.
• The earnings backdrop remains solid. Of the 60% of index members that have reported, 82% beat the EPS forecast, and aggregate earnings growth exceeds 30% year over year (FactSet).

Overnight and Europe

Asia. The Tokyo Stock Exchange was closed (Culture Day). The Hang Seng is up about 0.5%, helped by Hong Kong Q3 GDP rising 1.9% quarter over quarter. The Shanghai Composite is down 0.8% at 3,608.10 despite the People's Bank of China (PBoC) calling for greater use of equity-support tools. Korea's Kospi plunged 3.6%: the semiconductor selloff is spreading across the region. The Reserve Bank of Australia raised rates by 25 bp, its fifth hike of the year, but on a tight 6-3 vote.

Europe, around midday. The Euro Stoxx 50 is down 0.87% at 6,122, the DAX 0.88% at 25,753 and the CAC 40 0.48% at 8,009. The technology sector is down 2%. Tech is sinking while healthcare and food hold up: it's the same defensive rotation seen on Wall Street on Monday.

U.S. futures. The ES is nearly flat (-0.08%) around 7,569 points versus Monday's close. The other contracts are diverging: Nasdaq-100 +0.4%, Dow -0.6%, Russell 2000 -0.05%. Semiconductors are rebounding (Nvidia, NVDA, +1.3%; AMD +2.4%) and offsetting Apple's decline and crude's comeback. On Polymarket, the probability of a higher open is 45%.

Today's Calendar

Reading the JOLTS. The labor market is described as "low hiring, low firing," with just 29,000 jobs created in September. Openings well above 7.15M would support the case for a December rate hike: the 2-year would rise, weighing on growth stocks. A print below 7M would pull rates lower and could revive tech. Quits are the gauge of wage pressure to watch. The series is often heavily revised, so the reaction is likely to be short-lived.

Fed and Rates

No FOMC officials are scheduled today. The next appearances are Beth Hammack (Cleveland Fed) and Tom Barkin (Richmond Fed) on Thursday, November 5, followed by John Williams (New York Fed) on Friday.

Background. Kevin Warsh's Fed raised rates in September, the first hike since 2023. On October 28, it held them at 3.75-4.00% on a 10-2 vote. Governor Lisa Cook and Beth Hammack wanted an immediate hike. Austan Goolsbee (Chicago Fed), usually on the dovish side, called the latest inflation data "discouraging."

Expectations. According to CME FedWatch, the probability of a 25 bp hike on December 9 is about 73%, down from 80% a week earlier.

Yields. The 10-year is up 2 bp at 4.917%, the 2-year about 1 bp at 4.596% and the 30-year 1 bp at 5.288%. This year, yields and oil prices have generally moved in the same direction. Crude's rebound therefore limits the relief seen Monday in long-end rates.

Next major event. October payrolls (NFP) on Friday: 68,000 jobs expected, after 29,000.

Corporate Earnings

Apple. The quarter was solid:

• record revenue for a September quarter, up 12%;
• a record iPhone quarter;
• services at an all-time high.

The market is focusing on three negatives: the iPad miss, the Greater China miss, and a 47.9% margin inflated by about 1 point from tariff refunds. CFO Kevan Parekh attributed the expected margin decline to memory costs and Siri-related spending. This is the first quarter reported under new CEO John Ternus. Rising memory prices are also hitting the index's hardware makers and fueling the debate over tech margins.

Palantir. Growth reached 96% year over year. For the first time, U.S. commercial revenue exceeded revenue from the U.S. government. The stock is falling anyway: at these valuations, even a clear beat isn't enough.

Oracle (ORCL). The stock lost 8.6% on Monday after announcing a $20B raise (half equity, half debt). The new shares were priced at $116. It is up 0.4% premarket. Debt issuance from Alphabet, Meta and Microsoft is also widening: the credit market is closely watching how AI capex is being financed.

Before the open.

• Pfizer: the options-implied move is 4.1%. The call is at 4 p.m. and serves as a test for the healthcare sector, which has been a safe haven for several sessions.
• Eaton: implied move of 7.8%. The company is a bellwether for data center electrical investment; its orders will shed light on the strength of this cycle for industrials.
• Marathon Petroleum: the stock is up 171% since January. Its refining margins will set the tone for the index's refiners.
• Other reports: Apollo (APO), Archer-Daniels-Midland (ADM), Keurig Dr Pepper (KDP, $0.62 expected), Yum! Brands (YUM, $1.46), Sysco (SYY, $1.19) and Fiserv (FISV, $1.71).

Tonight.

• AMD is the key report. After Intel's (INTC) disappointing guidance last week (stock -20%), the market will mainly judge Q4 guidance and data center gross margin, around 56%. A miss would extend the Nasdaq-100 correction and weigh on Nvidia and Broadcom (AVGO).
• Arista (implied move of 10.8%) will provide insight into AI networking demand.
• Amgen (AMGN, 4.8% implied), Booking (7.6%), AIG and Block (XYZ) round out the evening.

Geopolitics and Conflicts

U.S. – Iran: war and the Strait of Hormuz

On Monday, the official IRNA news agency announced that Iran's Supreme Leader, Mojtaba Khamenei, had authorized the government to negotiate. According to Axios, Donald Trump told Israeli Prime Minister Benjamin Netanyahu that he wanted to give diplomacy time. Overnight, the Wall Street Journal reported a U.S. strike on Qeshm Island, and Reuters cites significant obstacles to a deal. Actual oil flows through Hormuz remain at 56% of pre-conflict levels. This hotspot hits markets via crude, then inflation, then the Fed and rates. A deal would lower energy prices and rates and benefit airlines and retailers. Iranian retaliation against shipping would do the opposite.

U.S. midterm elections

The vote decides control of Congress for the final two years of Donald Trump's second term. Exposed sectors are pharma (drug pricing), housing and AI data centers. A full Democratic victory would raise fears of tighter AI regulation and weigh on growth stocks. Defensives would benefit on a relative basis.

China – U.S.: chips and the yuan

According to the Financial Times, Nvidia reportedly asked its cloud customers to reduce their exposure to Chinese companies. The PBoC slowed the yuan's rise; it fell 0.4% to 6.6728 per dollar after 13 straight sessions of gains. This hotspot hits markets via semiconductors and the dollar.

Russia – Ukraine

Both countries continue to strike each other's infrastructure, and signals about possible negotiations remain mixed. The impact runs mainly through European gas as winter approaches.

Oil and Commodities

Brent is up 1.7% above $106 and December WTI 1.6% at $98.03. On Monday, Brent had plunged 7.6% to $104.77 at the close, its biggest one-day drop since July. The physical market is also sending a bearish signal: the Dubai curve is in contango, a sign that Middle East supply exceeds near-term demand for the first time since July.

Gold is down 1.3% at $3,916.80 on futures, after rebounding Monday from a one-year low. The IEA publishes its global gas security report today.

Index impact. Higher crude supports the energy sector, which underperformed Monday. But the sector carries little weight compared with tech. The main channel remains rates: Brent holding above $106 feeds inflation expectations and the odds of a December hike, which weighs on growth valuations.

Dollar and Volatility

The euro is flat at $1.1192. During Monday's session, the DXY traded around 101.6, slightly lower, as crude retreated. The VIX is up 0.6% at 21.28, above 20: traders are hedging ahead of the vote and AMD. The Russell 2000 is flat and tech is outperforming in futures, which doesn't look like a broad risk-off move. A sharp VIX jump above 22-23 would signal that election-related hedging is accelerating.

Watch Points for the Session

1. Before 3:30 p.m. (Paris time). Pfizer, Eaton and Marathon Petroleum reports, and Brent tracking. Brent above $107 or official confirmation of the Qeshm strike would weaken the ES.
2. 3:30 p.m., open. Apple's weight (-4.5%) in the initial order flow. The question is whether buying in semiconductors (NVDA, AMD) is enough to offset it. A "Dow down, Nasdaq up" split would reverse Monday's pattern.
3. 4:00 p.m., JOLTS and factory orders. A print above 7.3M would push the 2-year toward 4.65% and weigh on the index. Below 7M, rates would ease.
4. 4 p.m. - 5 p.m., Pfizer, Eaton and MPC calls. Eaton's data center orders will influence the industrial sector.
5. Afternoon. Volumes are often thin on election day, making moves more abrupt. Watch for Iran headlines.
6. After 10 p.m., AMD and Arista. They will set the ES trend during the evening electronic session.
7. Overnight. Election results. The market is bracing for a Democratic win: a Senate that stays Republican would be the positive surprise, while a clear blue wave would weigh on AI names.

The morning tone is cautious but not broken. A flat open followed by a moderate JOLTS would confirm it. A sharp rise in crude or an AMD miss tonight would invalidate it.