December S&P 500 futures (ESZ23) are down -0.50%, and December Nasdaq 100 E-Mini futures (NQZ23) are down -0.87% this morning as disappointing earnings reports and elevated Treasury yields weighed on sentiment while investors geared up for a flurry of U.S. economic data and more corporate earnings results.
Meta Platforms (META) fell over -2% in pre-market trading after the company reported better-than-expected Q3 results but warned that its advertising business depends heavily on the macroeconomic environment for spending. “We are very subject to volatility in the macro landscape. The revenue outlook is uncertain for 2024,” Chief Financial Officer Susan Li said on a call with investors. Also, Alphabet Inc (GOOGL) slid more than -2% in pre-market trading, extending yesterday’s drop on disappointing cloud figures.
In Wednesday’s trading session, Wall Street’s major averages ended lower, with the benchmark S&P 500 posting a 4-3/4 month low and the tech-heavy Nasdaq 100 notching a 4-1/2 month low. Alphabet Inc (GOOGL) plunged over -9% after the company reported weaker-than-expected Q3 revenue from its cloud computing unit, overshadowing better-than-expected overall results. Also, Automatic Data Processing Inc (ADP) slumped more than -9% after the technology company posted weaker-than-expected Q1 revenue. In addition, Texas Instruments Incorporated (TXN) fell over -3% after the analog semiconductor company reported weaker-than-expected Q3 revenue and provided below-consensus Q4 guidance. On the bullish side, Microsoft Corporation (MSFT) gained about +3% after the tech giant posted upbeat Q1 results, aided by strong growth in its Azure cloud.
“The question now turns to earnings as earnings drive stock prices. This is where the rubber meets the road. A recession would result in higher unemployment, less consumer spending, slower gross domestic product growth, and lower earnings, which implies lower stock prices,” said Howard Ward, chief investment officer of Growth Equities and portfolio manager at Gabelli Funds.
Economic data on Wednesday showed that U.S. new home sales rose +12.3% m/m to a 20-month high of 759K in September, stronger than expectations of 680K. At the same time, U.S. September building permits came in at 1.471M, weaker than expectations of 1.473M.
Meanwhile, U.S. rate futures have priced in a 97.1% probability of no hike at the November FOMC meeting and a 29.1% chance of a 25 basis point rate increase at the December FOMC meeting.
On the earnings front, notable companies like Amazon.com (AMZN), Mastercard (MA), Merck&Co (MRK), Intel (INTC), United Parcel Service (UPS), Altria (MO), and Ford Motor (F) are slated to release their quarterly results today.
In other news, the Israel Defense Forces said they conducted an overnight raid in northern Gaza “as part of preparations for the next stages of combat.”
Today, all eyes are focused on the U.S. GDP preliminary reading in a couple of hours. Economists, on average, forecast that U.S. GDP will stand at +4.3% q/q in the third quarter, compared to the second-quarter value of +2.1% q/q.
Also, investors will likely focus on U.S. Core Durable Goods Orders data, which came in at +0.4% m/m in August. Economists foresee the new figure to be +0.2% m/m.
U.S. Durable Goods Orders data will be reported today. Economists foresee this figure to stand at +1.7% m/m in September, compared to the previous value of +0.2% m/m.
U.S. Pending Home Sales data will also be closely watched today. Economists expect September’s figure to be -1.8% m/m, compared to the previous number of -7.1% m/m.
U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 208K, compared to last week’s value of 198K.
In the bond markets, United States 10-year rates are at 4.952%, down -0.08%.
The Euro Stoxx 50 futures are down -1.20% this morning as a batch of poor corporate earnings drained sentiment toward riskier assets while investors awaited the European Central Bank’s interest rate decision. Automobile and bank stocks fell the most on Thursday. Meanwhile, the European Central Bank is scheduled to announce its interest rate decision later in the session, with the prevailing expectation being that interest rates will remain unchanged. In corporate news, Standard Chartered Plc (STAN.L.EB) tumbled over -12% after the U.K. lender missed Q3 profit estimates. Also, Mercedes-Benz Group Ag (MBG.D.DX) slid more than -5% after the luxury carmaker posted a drop in Q3 earnings and projected car-making margins to be at the low end of its forecast. In addition, Unilever Plc (ULVR.LN) fell over -2% after reporting weaker-than-expected Q3 sales.
The European economic data slate is mainly empty on Thursday.
Asian stock markets today closed mixed. China’s Shanghai Composite Index (SHCOMP) closed up +0.48%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -2.14%.
China’s Shanghai Composite today closed higher, continuing its positive momentum from the previous two sessions, propelled by the government’s announcement of a 1 trillion yuan bond issuance and state fund buying. The official Xinhua News Agency said Tuesday that the country’s legislature approved a plan to raise the fiscal deficit ratio for 2023 to about 3.8% of gross domestic product, up from the 3% target set in March, which entails the issuance of an additional 1 trillion yuan in sovereign debt in the fourth quarter to support disaster relief and construction. Meanwhile, new energy stocks plunged on Thursday after Reuters reported that high interest rates were impeding the efforts of climate regulators and automakers to expedite the transition to electric vehicles, exemplified by the termination of a GM-Honda partnership and a warning from a battery manufacturer. In addition, Hong Kong-listed property stocks slumped as concerns persisted regarding a potential debt crisis in the real estate sector, while tech giants outperformed.
Japan’s Nikkei 225 Stock Index closed sharply lower today as a spike in bond yields and concerns surrounding Japanese monetary policy dampened investor sentiment. Chip-related stocks tumbled on Thursday, mirroring overnight declines in their U.S. counterparts. As a result, Advantest Corp slumped over -6%, Tokyo Electron Ltd plunged about -5%, and Screen Holdings Co Ltd fell more than -5%. Interest rate-sensitive property stocks also retreated, with Mitsui Fudosan Co Ltd falling over -3% and Tokyu Fudosan Holdings dropping more than -2%. Meanwhile, Japanese government bond yields surged to fresh decade highs on Thursday, driven by an increase in U.S. Treasury yields overnight, as investors considered the likelihood of the Bank of Japan making policy adjustments at next week’s monetary policy meeting. In other news, Japan’s Prime Minister Fumio Kishida stated Thursday that the Bank of Japan’s inflation-oriented monetary policy is not at odds with the government’s fiscal stimulus measures aimed at alleviating the financial strain on households due to increasing living costs. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up +8.50% to 23.99.
Pre-Market U.S. Stock Movers
Meta Platforms (META) fell over -2% in pre-market trading after the company reported better-than-expected Q3 results but warned that its advertising business depends heavily on the macroeconomic environment for spending.
Align Technology Inc (ALGN) tumbled more than -24% in pre-market trading after the dental products company posted downbeat Q3 results and lowered its full-year revenue guidance.
Endeavor Group Holdings Inc (EDR) surged over +22% in pre-market trading after Silver Lake said it is working towards making a proposal to take the firm private.
ServiceNow Inc (NOW) climbed more than +4% in pre-market trading after reporting stronger-than-expected Q3 EPS and raising its 2023 subscription revenue guidance.
International Business Machines (IBM) gained over +1% in pre-market trading after the IT tech giant posted better-than-expected Q3 results and boosted its annual free cash flow guidance.
Adobe Systems Incorporated (ADBE) rose about +0.7% in pre-market trading after Oppenheimer upgraded the stock to Outperform from Perform.
Alphabet Inc (GOOGL) slid more than -2% in pre-market trading, extending yesterday’s drop on disappointing cloud figures.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Thursday - October 26th
Amazon.com (AMZN), Mastercard (MA), Merck&Co (MRK), Linde PLC (LIN), Comcast (CMCSA), Intel (INTC), United Parcel Service (UPS), Honeywell (HON), Bristol-Myers Squibb (BMY), Altria (MO), American Tower (AMT), Boston Scientific (BSX), Northrop Grumman (NOC), Chipotle Mexican Grill (CMG), Arthur J Gallagher (AJG), Republic Services (RSG), Ford Motor (F), Valero Energy (VLO), Keurig Dr Pepper (KDP), Carrier Global (CARR), Hershey Co (HSY), Kenvue (KVUE), Digital (DLR), WW Grainger (GWW), Capital One Financial (COF), DexCom (DXCM), L3Harris Technologies (LHX), PG E (PCG), Newmont Goldcorp (NEM), Mobileye Global (MBLY), Vulcan Materials (VMC), West Pharmaceutical Services (WST), Hartford (HIG), Willis Towers Watson (WTW), Tractor Supply (TSCO), VeriSign (VRSN), Royal Caribbean Cruises (RCL), Weyerhaeuser (WY), ResMed (RMD), FirstEnergy (FE), Tradeweb Markets (TW), Laboratory America (LH), CenterPoint Energy (CNP), LPL Financial (LPLA), Principal Financial (PFG), Cincinnati Financial (CINF), CMS Energy (CMS), Erie Indemnity (ERIE), Bunge (BG), Textron (TXT), Reliance Steel&Aluminum (RS), Seagate (STX), Southwest Airlines (LUV), Essex Property (ESS), Deckers Outdoor (DECK), Enphase (ENPH), UDR (UDR), LKQ (LKQ), Gaming & Leisure Properties (GLPI), SS&Cs (SSNC), Lennox (LII), Carlisle (CSL), International Paper (IP), Masco (MAS), Kimco Realty (KIM), Kinsale Capital (KNSL), Camden Property (CPT), AO Smith (AOS), EMCOR (EME), TechnipFMC (FTI), Bio-Rad Labs (BIO), Eastman Chemical (EMN), Juniper (JNPR), Wex (WEX), Nov (NOV), Hasbro (HAS), Skechers (SKX), Old Republic (ORI), NewYork Community Bancorp (NYCB), United States Steel (X), Pharming Group (PHAR), Houlihan Lokey Inc (HLI), TAL Education (TAL), Texas Roadhouse (TXRH), Encompass Health (EHC), FirstService (FSV), FTI Consulting (FCN), Applied Industrial Technologies (AIT), STAG Industrial (STAG), SPS Commerce (SPSC), Olin (OLN), Comfort Systems (FIX), Eagle Materials (EXP), Cullen/Frost Bankers (CFR), First American (FAF), Mohawk Industries (MHK), South State (SSB), Brunswick (BC), Kirby (KEX), Boston Beer (SAM), Rithm Capital (RITM), Columbia Sportswear (COLM), Popular (BPOP), Exponent (EXPO), ExlServices (EXLS), Harley-Davidson (HOG), Valley National (VLY), Merit (MMSI), Insmed (INSM), Visteon (VC), Chemours Co (CC), Hertz Global Holdings (HTZ), AllianceBernstein Holding LP (AB), PennyMac Financial (PFSI), Terex (TEX), Carpenter Technology (CRS), NorthWestern (NWE), MDC (MDC), Blueprint Medicines Corp (BPMC), Arch Resources (ARCH), Medical Properties (MPW), California Water Service (CWT), Cousins Properties (CUZ), Coursera (COUR), Millicom (TIGO), TRI Pointe Homes (TPH), Lazard (LAZ), Ameris (ABCB), McGrath (MGRC), Integer Hld (ITGR), Hub Group (HUBG), Evertec Inc (EVTC), Rogers (ROG), Expro Holdings NV (XPRO), Axos Financial (AX), Eldorado Gold (EGO), Eastern Bankshares (EBC), Adtalem Education (ATGE), PTC Therapeutics (PTCT), The Bancorp (TBBK), Gentherm (THRM), Minerals Technologies (MTX), SkyWest (SKYW), Patrick (PATK), Pebblebrook Hotel (PEB), First Merchants (FRME), Sonic Automotive (SAH), Novocure Ltd (NVCR), H&E Equipment (HEES), Bread Financial Holdings (BFH), LTC Properties (LTC), Taro Pharma Industries (TARO), CTS Corp (CTS), World Fuel Services (WKC), Elme (ELME), Ladder Capital A (LADR), Provident (PFS).
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