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Upcoming Elections, Fed Meeting May Lead To Choppy Trading On Wall Street

The major U.S. index futures are pointing to a roughly flat open on Monday, with stocks likely to show a lack of direction following the strong upward move seen last week.

Traders may be reluctant to make significant moves ahead of the highly anticipated midterm elections on Tuesday, which will decide control of both the House and Senate.

Democrats are seen as having a much better chance to claim a majority in the House than in the Senate, but controlling the lower chamber would still allow Democrats to hinder President Donald Trump's agenda.

The Federal Reserve's looming monetary policy announcement may also keep some traders on the sidelines, with the Fed due to announce is latest decision on Thursday.

While the Fed is widely expected to leave interest rates unchanged, traders will keep a close eye on the accompanying statement for clues about an expected rate hike in December.

After moving notably higher for a few sessions, stocks gave back some ground during the trading day on Friday. The major averages initially moved to the upside but pulled back into negative territory as the session progressed.

The major averages ended the day in the red but well off their lows of the session. The Dow fell 109.91 points or 0.4 percent to 25,270.83, the Nasdaq slumped 77.06 points or 1 percent to 7,356.99 and the S&P 500 slid 17.31 points or 0.6 percent to 2,723.06.

Despite the pullback on the day, the major averages moved significantly higher for the week. The Nasdaq surged up by 2.6 percent, while the Dow and the S&P 500 both jumped by 2.4 percent.

The downturn on Wall Street was led by Apple (AAPL), with the tech giant tumbling by 6.6 percent to a nearly three-month closing low.

The steep drop by Apple came after the company reported fiscal fourth quarter earnings and revenues that exceeded estimates but weaker than expected iPhone shipments.

Apple also forecast fiscal first quarter revenues of $89 to $93 billion, with the midpoint below the consensus estimate of $93 billion.

The pullback by the major averages also came as traders digested a closely watched Labor Department report showing stronger than expected job growth in the month of October.

The Labor Department said non-farm payroll employment surged up by 250,000 jobs in October after rising by a downwardly revised 118,000 jobs in September. Economists had expected an increase of about 190,000 jobs.

The report also said the unemployment rate in October was unchanged from the previous month at 3.7 percent, its lowest level since hitting 3.5 percent in December of 1969.

Average hourly employee earnings rose by $0.05 to $27.30 in October, reflecting a 3.1 percent increase compared to the same month a year ago.

The annual rate of hourly earnings growth accelerated from 2.8 percent in September, reaching the fastest pace since April of 2009.

The upbeat jobs data paints of positive picture for the U.S. economy but also led to renewed concerns about the outlook for interest rates.

"The U.S. jobs market remains incredibly strong and with wages starting to accelerate, domestic price pressures will increase," said ING Chief International Economist James Knightley.

He added, "This will keep the Federal Reserve on its path of 'gradual' interest rate hikes with next week's FOMC meeting set to signal a December move."

Traders also kept an eye on conflicting reports about the likelihood of a trade deal between the U.S. and China ahead of meeting between President Donald Trump and Chinese President Xi Jinping later this month.

Natural gas stocks moved sharply lower over the course of the trading session, dragging the NYSE Arca Natural Gas Index down by 2.1 percent.

Within the natural gas sector, Newfield Exploration (NFX) pulled back sharply after jumping on Thursday after agreeing to be acquired by Encana (ECA) in an all-stock transaction valued at approximately $5.5 billion.

Significant weakness was also visible among semiconductor stocks, as reflected by the 1.5 percent slump by the Philadelphia Semiconductor Index. The index gave back ground after moving notably higher over the past few sessions.

Oil stocks also moved notably lower amid a continued decrease by the price of crude oil. Pharmaceutical and commercial real estate stocks also moved to the downside on the day, while telecom and steel stocks saw considerable strength.

Commodity, Currency Markets

Crude oil futures are edging up $0.16 to $63.30 a barrel after sliding $0.55 to $63.14 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,229.30, down $4 from the previous session's close of $1,233.30. On Friday, gold fell $5.30.

On the currency front, the U.S. dollar is trading at 113.24 yen compared to the 113.20 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1375 compared to last Friday's $1.1388.

Asia

Asian stocks fell across the board on Monday as hopes of an imminent U.S.-China trade deal faded and investors looked ahead to the U.S. midterm elections as well as the Federal Reserve meeting for directional cues.

China's Shanghai Composite Index ended the session down 11.05 points or 0.4 percent at 2,665.43 despite President Xi Jinping praising globalization and China's commitment to free trade.

On the data front, China's private sector expanded at the slowest pace in more than two years in October, with both services and manufacturing seeing weaker performances, survey results from IHS Markit showed today. The Caixin composite output index fell to a 28-month low of 50.5 in October from 52.1 in September.

Hong Kong's Hang Seng Index tumbled 551.96 points or 2.1 percent to 25,934.39. The private sector in Hong Kong continued to contract in October, albeit at a slower pace, the latest survey from Nikkei showed with a PMI score of 48.6, up from 47.9 in September.

Japanese shares fell sharply in thin trading as caution set in ahead of the U.S. midterm elections. The Nikkei 225 Index slumped 344.67 points or 1.6 percent to 21,898.99 after jumping 5 percent last week. The broader Topix Index closed 1.1 percent lower at 1,640.39.

Gaming giant Nintendo gave up 2.7 percent after posting disappointing earnings last week. SoftBank shares ended 0.6 percent higher. After the market close, the company reported second-quarter earnings that topped forecasts.

Bank of Japan Governor Haruhiko Kuroda said the economy has clearly improved and the central bank will consider both positive and negative effects of its monetary policy in a balanced manner going forward.

Separately, domestic demand is expected to continue on an upward trend, while annual inflation is predicted to maintain its gradual climb to the target of 2 percent, the minutes from the Bank of Japan's September meeting revealed.

Activity in Japan's services sector expanded at a faster rate in October, the latest survey from Nikkei revealed, with a PMI score of 52.4, up from 50.2 in September.

Australian markets finished lower to snap a six-day winning streak, with energy and healthcare stocks pacing the decliners. The benchmark S&P/ASX 200 Index dropped 31.10 points or 0.5 percent to 5,818.10, while the broader All Ordinaries Index ended down 0.5 percent at 5,904.80.

Hearing aid maker Cochlear tumbled 3.8 percent after it lost a U.S. patent infringement case. CSL fell 2.4 percent to end lower for the first time in seven sessions.

Energy stocks such as Woodside Petroleum, Santos, Oil Search and Beach Energy declined 1-3 percent as oil prices continued to fall amid signs of rising global supply.

Lender Westpac Banking Corp rose 0.6 percent after reporting a 1 percent rise in annual net profit, in line with expectations. ANZ climbed 1.1 percent and NAB advanced 0.7 percent.

Mining giant BHP Billiton fell 1.2 percent, while Rio Tinto gained 1.6 percent and Fortescue Metals Group jumped 2.4 percent.

Online travel agency Webjet entered a trading halt after it agreed to acquire Dubai-based business travel wholesaler Destinations of the World for A$240 million.

On the economic front, the latest survey from the Australian Industry Group revealed that the service sector in Australia continued to expand in October, albeit at a slower pace, with a PSI score of 51.1, down from 52.5 in September.

Europe

European stocks are seeing modest strength amid cautious trading ahead of the U.S. midterm elections on Tuesday and the Federal Reserve's monetary policy announcement on Thursday.

The dollar held steady after White House economic adviser Larry Kudlow downplayed the potential for a quick trade deal between the U.S. and China.

Tuesday's midterm elections will give Democrats a chance to retake the House and more effectively oppose President Donald Trump's agenda.

Meanwhile, the Federal Reserve is widely expected to leave interest rates unchanged on Thursday, although the accompanying statement may provide clues about the anticipated rate hike next month.

While the U.K.'s FTSE 100 Index has risen by 0.3 percent, the French CAC 40 Index and the German DAX Index are both up by 0.2 percent.

Swiss drug giant Novartis has risen after issuing a Research & Development update, highlighting its development pipeline including potential blockbusters and advanced therapy platforms.

British software product group Micro Focus International has also advanced. The company said that trading for the twelve months ended October 31st has continued in line with the Board's expectations with an improved revenue trajectory in the second half of the year.

Societe Generale shares have also moved slightly higher after the French bank entered into an agreement to sell Euro Bank, its retail banking subsidiary in Poland, to Bank Millennium.

On other hand, STMicroelectronics has declined after the semiconductor company launched a share buy-back program of up to $750 million to be executed within a 3-year period.

U.S. Economic Reports

The Institute for Supply Management is scheduled to release its report on activity in the service sector in the month of October at 10 am ET.

The ISM's non-manufacturing index is expected to pull back to 59.5 in October after climbing to 61.6 in September, although a reading above 50 would still indicate growth in the service sector.

At 1 pm ET, the Treasury Department is due to announce the results of its auction of $37 billion worth of three-year notes.

Dallas Federal Reserve President Robert Kaplan is scheduled to participate in moderated discussion on national and global economic issues at the Dallas Fed at 7 pm ET.

Stocks In Focus

Shares of Diamond Offshore Drilling (DO) are moving significantly higher in pre-market trading after the offshore oil and gas drilling contractor reported better than expected third quarter results.

Athletic apparel maker Under Armour (UAA) is also seeing notable pre-market strength after Piper Jaffray upgraded its rating on the company's stock to Overweight from Neutral.

Shares of Berkshire Hathaway (BRK.B) may also move to the upside after the conglomerate run by billionaire Warren Buffett reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, shares of Apple (AAPL) may extend last Friday's sell-off after a report from Japan's Nikkei newspaper said demand for the tech giant's iPhone XR appears to be disappointing.

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