Morning Markets
December E-Mini S&P 500 futures (ESZ23) are down -0.43%, and the Dec Nasdaq 100 E-Mini futures (NQZ23) are down -0.63%.
Stock index futures this morning are moderately lower on disappointing news from Meta Platforms (META), which is down more than -4% in pre-market trading after warning about ad revenue in an uncertain economic environment. Meanwhile, Alphabet (GOOGL) is down another -2.0% in pre-market trading, adding to Wednesday’s -9.28% plunge on its disappointing cloud earnings report. Amazon.com is down -0.8% in pre-market trading ahead of its earnings report after today’s close.
Stocks were also undercut by Middle East tensions after news that Israel conducted a limited tank incursion into Gaza before retreating. The markets are waiting for Israel’s all-out ground invasion, which could spark an expansion of the war to include Hezbollah.
Today’s U.S. economic reports were generally stronger than expected, which was hawkish for Fed policy, although U.S. T-note yields fell after the news. U.S. Q3 GDP rose +4.9% (q/q annualized), stronger than expectations of +4.5%. The Q4 GDP price index rose +3.5%, stronger than expectations of +2.7%, but the core price index rose by +2.4%, slightly weaker than expectations of +2.5%.
Also on the strong side, Sep U.S. durable goods orders rose +4.7%, much stronger than expectations of +1.9%. Sep core (ex defense and aircraft) capital goods orders, a proxy for capital spending, rose +0.6%, stronger than expectations of unchanged.
On the weaker side, U.S. weekly initial unemployment claims rose by +10,000 to 210,000, which showed a slightly weaker labor market than expectations for an increase to 207,000. Weekly continuing claims rose by +63,000 to 1.790 million, showing a weaker labor market than expectations for an increase to 1.74 million.
The markets are discounting a 2% chance that the FOMC will raise the funds rate by +25 bp at the next FOMC meeting that ends on November 1, and a 28% chance for that +25 bp rate hike at the following meeting that ends on December 13. The markets are then expecting the FOMC to begin cutting rates in mid-2024 in response to an expected slowdown in the U.S. economy.
U.S. and European bond yields are lower. The 10-year T-note yield is down -4.2 bp at 4.913%. The 10-year German bund yield is down -3.7 bp at 2.853%. The 10-year UK gilt yield is down -3.6 bp at 4.575%.
The European Central Bank (ECB) today left its key rates unchanged, as the market expected, with the deposit rate at 4.00% and the main refinancing rate at 4.50%. The markets had expected the ECB to halt its rate-hike regime today, given the weakness in the Eurozone economy and the recent rise in European bond yields. The markets are discounting a small 12% chance for an ECB rate hike at its meeting in December, but the market is then beginning to discount ECB rate cuts in 2024.
Overseas stock markets are mixed and were undercut by Wednesday’s sharp -2.47% sell-off in the Nasdaq 100 index. The Euro Stoxx 50 is down -0.52%. China’s Shanghai Composite Index closed up +0.48%. Japan’s Nikkei 225 today closed down -2.14%.
Pre-Market U.S. Stock Movers
Meta Platforms (META) tumbled more than -4% in pre-market trading after the company warned about the likelihood of lower ad revenues, with the CFO saying, “We are very subject to volatility in the macro landscape. The revenue outlook is uncertain” for 2024. Analysts were also concerned about Meta’s profitability, given its heavy spending on AI and virtual reality.
Mattel (MAT) is down more than -10% in pre-market trading after the company disappointed investors by citing softness in the toy industry and weaker global economic growth.
Ford (F) is up +2.3% in pre-market trading after news late Wednesday that Ford and the UAW have reached a tentative labor agreement.
Merck (MRK) is up +0.3% in pre-market trading after boosting its sales guidance for 2023.
IBM (IBM) is up +1.4% in pre-market trading after a Q3 earnings beat and affirmation of its guidance.
Flex (FLEX) is up +7.7% in pre-market trading after a positive reception for its earnings report.
Earnings Reports (10/26/2023)
A O Smith Corp (AOS), Altria Group Inc (MO), Amazon.com Inc (AMZN), American Tower Corp (AMT), Arthur J Gallagher & Co (AJG), Bio-Rad Laboratories Inc (BIO), Boston Scientific Corp (BSX), Bristol-Myers Squibb Co (BMY), Bunge Ltd (BG), Camden Property Trust (CPT), Capital One Financial Corp (COF), Carrier Global Corp (CARR), CenterPoint Energy Inc (CNP), Chipotle Mexican Grill Inc (CMG), Cincinnati Financial Corp (CINF), CMS Energy Corp (CMS), Comcast Corp (CMCSA), Dexcom Inc (DXCM), Digital Realty Trust Inc (DLR), Eastman Chemical Co (EMN), Enphase Energy Inc (ENPH), Essex Property Trust Inc (ESS), FirstEnergy Corp (FE), Ford Motor Co (F), Hartford Financial Services Gr (HIG), Hasbro Inc (HAS), Hershey Co/The (HSY), Honeywell International Inc (HON), Intel Corp (INTC), International Paper Co (IP), Juniper Networks Inc (JNPR), Kenvue Inc (KVUE), Keurig Dr Pepper Inc (KDP), Kimco Realty Corp (KIM), L3Harris Technologies Inc (LHX), Laboratory Corp of America Hol (LH), Linde PLC (LIN), LKQ Corp (LKQ), Masco Corp (MAS), Mastercard Inc (MA), Merck & Co Inc (MRK), Mohawk Industries Inc (MHK), Newmont Corp (NEM), Northrop Grumman Corp (NOC), PG&E Corp (PCG), Principal Financial Group Inc (PFG), Republic Services Inc (RSG), ResMed Inc (RMD), Royal Caribbean Cruises Ltd (RCL), Seagate Technology Holdings PL (STX), Southwest Airlines Co (LUV), Textron Inc (TXT), Tractor Supply Co (TSCO), UDR Inc (UDR), United Parcel Service Inc (UPS), Valero Energy Corp (VLO), VeriSign Inc (VRSN), Vulcan Materials Co (VMC), West Pharmaceutical Services Inc (WST), Weyerhaeuser Co (WY), Willis Towers Watson PLC (WTW), WW Grainger Inc (GWW).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
