US index futures showed mixed sentiment in early trading on Thursday. This comes amid a rise in long-term interest rates, reaching their highest levels since 2007 due to expectations of sustained high rates. Investors are digesting another batch of quarterly earnings while closely monitoring the evolving conflict between Israel and Hamas, which begins to influence economic policy outlooks. Throughout the day, remarks from Federal Reserve Chairman, Jerome Powell, could influence investment decisions.
At 7:08 AM, Dow Jones futures were down by 19 points or 0.06%. S&P 500 futures declined by 0.05%, while Nasdaq-100 futures increased by 0.12%.
The 10-year U.S. Treasury yield stood at 4.966%, ahead of Powell’s speech. This is likely his final address before the Fed’s meeting set for November 1st. Powell is expected to emphasize that the current long-term interest rates are sufficient to counteract further increases in the benchmark rate, signaling an end to the rate hike cycle.
In the commodities market, West Texas Intermediate crude oil for November declined by 1.20%, trading at $87.26 per barrel. Brent crude for December was down 1.44%, near $90.18 per barrel. Meanwhile, 62% concentrated iron ore, traded on the Dalian Exchange, rose 0.40% to $118.81 per ton.
On Thursday’s U.S. economic calendar, investors are awaiting the 8:00 AM weekly unemployment insurance data, projected to show 212,000 new claims. At the same time, the Philadelphia Fed manufacturing index will be released, with a consensus drop of 6.4 points for October. At 10:00 AM, September’s existing home sales data is expected, with projections of 3.89 million.
Regarding the Fed, apart from Powell’s speech at 12:00 PM, there will be several other speeches throughout the day, though market attention will likely focus on the remarks of the central bank’s chairman. At 9:00 AM, Fed Vice Chairman Philip Jefferson is scheduled to speak, followed by Austan Goolsbee and Michael Barr, President of the Chicago Fed and Fed member, respectively, at 1:20 PM.
Scheduled for 4 PM is a speech by Raphael Bostic, President of the Atlanta Fed. Patrick Harker of the Philadelphia Fed will speak at 5:30 PM, and to wrap up the day, Lorie Logan, President of the Dallas Fed, is set to speak at 7:00 PM.
During his visit to Israel, U.S. President Joe Biden asserted that “terrorists will not prevail” and pledged to request from Congress unprecedented support for Israel’s defense against Hamas. Additionally, he announced humanitarian aid of $100 million for civilians in Gaza.
In Asia, concerns about the Middle East conflict and China’s faltering real estate sector impacted the markets. In September, China’s property prices declined by 0.1% year-on-year. Uncertainties persist around companies like Country Garden and Evergrande due to potential financial issues. In Japan, September trade data exceeded expectations, pointing to a resilient economy. The HSI index in Hong Kong fell 2.46%, while the Shanghai Composite decreased by 1.74%. Tokyo’s Nikkei 225 index was down 1.91%.
In Europe, weak corporate results combined with geopolitical issues resulted in market downturns. Notably, Nestlé’s shares dropped after releasing disappointing third-quarter results.
At Wednesday’s market close, stock markets ended lower, while oil prices surged due to escalating tensions between Iran and Israel following an incident at a Gaza hospital, undermining Middle East diplomatic efforts. The Dow Jones dropped 332.57 points, or 0.98%, to 33,665.08 points. The S&P 500 declined 58.60 points, or 1.34%, to 4,314.60, and the Nasdaq Composite fell 219.44 points, or 1.62%, to 13,314.30.
In the corporate arena, Morgan Stanley (NYSE: MS) faced a decline after reporting reduced profits. The US Treasury market remained stable after a strong demand in a 20-year bond auction. Investors closely monitored Federal Reserve members’ statements regarding the North American economy, noting varying views on monetary policy. New York Fed Chief John Williams emphasized the need to maintain high interest rates for a period to control inflation.
Before Thursday’s market open, investors will focus on earnings reports from AT&T (NYSE:T), American Airlines (NASDAQ:AAL), TSMC (NYSE:TSM), Blackstone (NYSE:BX), Nokia (NYSE:NOK), Truist Financial (NYSE:TFC), Union Pacific (NYSE:UNP), and others. After the closing bell, results from Intuitive Surgical (NASDAQ:ISRG), CSX (NASDAQ:CSX), WD-40 Company (NASDAQ:WDFC), and more are expected.
Wall Street Corporate Highlights for Today
Amazon (NASDAQ:AMZN) – Amazon announced plans to introduce drone deliveries in the UK, Italy and another location in the US as part of its expanded aerial delivery program. Customers will be able to opt for drone deliveries from 2024, integrated into Amazon’s existing fulfillment network. The Prime Air service is now available in two cities in the US, and the company has been working to use unmanned drones for commercial deliveries since 2020. Additionally, Amazon implemented the “Sequoia” robotic system in a Houston warehouse to improve management inventory and speed up deliveries. This technology, which includes mobile robots and robotic arms, increases inventory storage efficiency by up to 75% and reduces order processing time by up to 25%. Amazon is also testing the “Digit” bipedal robot from Agility Robotics.
Alphabet (NASDAQ:GOOGL) – The US Department of Justice continues its antitrust case against Alphabet alleging Google’s monopoly. The 10-week trial is halfway over, focusing on payment agreements with companies including Apple (NASDAQ:AAPL) and Samsung. In other news, Alphabet announced that it will manufacture Pixel 8 smartphones in India from 2024, as announced at the Google for India event. They will partner with local and global suppliers for assembly. Furthermore, Google’s Russian subsidiary was declared bankrupt by a Moscow court after a process that lasted more than a year. Alphabet’s Russian unit filed for bankruptcy in the summer of 2022 after authorities seized its bank account, affecting payments to employees and suppliers. The company faced challenges related to censorship and access to Russian content on YouTube.
Meta Platforms (NASDAQ:META) – Meta Platforms will introduce broadcast channels on Facebook and Messenger, enabling public distribution of messages. This occurs in a context of online competition, while Telegram plays an important role in global events. Meta is testing this function and plans to launch it soon. WhatsApp and Instagram already have similar features.
Intel (NASDAQ:INTC) – Intel CEO Pat Gelsinger emphasized the importance of a coordinated plan between industry and the US government to compete globally in chip manufacturing and research. According to him, it is crucial to accelerate funding for the Chips Act and address the talent shortage by supporting the immigration of STEM students. Gelsinger believes the US and Europe can capture a significant share of the advanced chip market by the end of the decade with the right policies and investment in long-term innovation.
VMware (NYSE:VMW), Broadcom (NASDAQ:AVGO) – Beijing is considering blocking Broadcom’s purchase of VMware, valued at $69 billion. China’s State Administration for Market Regulation has not yet approved the deal due to recent US chip controls.
Walt Disney (NYSE:DIS) – Disney will report sports programming revenue starting in the fourth quarter, dividing its media and entertainment businesses into separate segments: entertainment and sports. The move follows a company restructuring announced earlier this year.
Starbucks (NASDAQ:SBUX) – Starbucks has launched a smaller cup in China called the “Intenso Collection,” measuring 259ml, aiming to attract consumers in a competitive market. The novelty is a strategy to maintain customer interest in a scenario of increasing competition from local brands, such as Luckin Coffee and Manner Coffee, which are launching innovative products. The new size is only available in mainland China for now, and its international offering will depend on customer response.
Costco Wholesale (NASDAQ:COST) – Craig Jelinek, longtime CEO of Costco Wholesale, will step down from the role early next year, handing it over to Ron Vachris, the company’s veteran chief operating officer. Vachris, who joined Costco more than 40 years ago as a forklift driver, takes over as CEO on January 1, 2024, while Jelinek will remain as a consultant until April to assist with the transition.
Foot Locker (NYSE:FL) – Goldman Sachs downgraded Foot Locker’s recommendation to “Sell” from “Neutral” and set a price target of $18 per share, according to information from Fly. As a result, Foot Locker shares fell 5.2% to $20.80.
Rite Aid (NYSE:RAD) – Rite Aid, a US drugstore chain, expressed concerns about its survival in the market after filing for Chapter 11 bankruptcy. The debt-ridden company plans to close underperforming stores, sell its Elixir unit and resolve legal actions related to addictive opioids. Rite Aid is focused on successfully exiting Chapter 11 and generating post-restructuring liquidity.
AstraZeneca (NASDAQ:AZN) – AstraZeneca revealed data on its experimental lung cancer drug that disappointed analysts. A greater improvement in patients’ lifespan was expected compared to chemotherapy.
Icahn Enterprises (NASDAQ:IEP), Illumina (NASDAQ:ILMN) – Investor Carl Icahn filed a lawsuit against Illumina’s board of directors, alleging breach of fiduciary duties, related to the acquisition of Grail. Icahn, who recently won a seat on the board, pressured the company to scrap the deal. Illumina’s share price has fallen 36% since January.
Rentokil Initial (NYSE:RTO) – Rentokil Initial warned that annual revenue and margins in North America will be below expectations, leading to a 14.8% drop in shares in Thursday’s pre-market. This is due to weak demand for chemicals and economic uncertainty in the US.
Spirit AeroSystems (NYSE:SPR), Boeing (NYSE:BA) – Spirit AeroSystems reached an agreement with Boeing for financing and price adjustments in production of the 737 and 787, boosting Spirit shares by 23% on Wednesday. Additional sales of $455 million are expected through 2025 and a reduction of $265 million from 2026 to 2033. Boeing will extend financing and provide $100 million in tooling. The agreement includes a control clause in the event of an acquisition of Spirit. This could lead to future deals with Airbus. Spirit projects third-quarter revenue of $1.43 to $1.45 billion. Shares of Spirit closed at $21.16 and Boeing at $185.69 on Wednesday.
Tesla (NASDAQ:TSLA) – Elon Musk, CEO of Tesla, warned about challenges in the production of the Cybertruck electric pickup truck and announced deliveries starting on November 30th. Demand for electric vehicles has declined, leading to price cuts by Tesla. Elon Musk cited concerns about financing costs and economic uncertainty, expressing caution in expanding electric vehicle production due to economic uncertainty and demand. Elon Musk also expressed concerns about high interest rates affecting car buyers and was hesitant about factory expansion in Mexico. Tesla announced in March an investment of more than US$5 billion in Mexico. Two Chinese Tesla suppliers plan to invest nearly a billion dollars in the state of Nuevo León, Mexico, where Tesla is building the new factory. The investment includes US$700 million from Ningbo Tuopu Group and US$260 million from Hesai Technology.
Lordstown Motors (NASDAQ:RIDE) – Lordstown Motors has obtained court approval to sell its manufacturing assets for $10.2 million to LAS Capital, a company affiliated with its founder Stephen Burns. The sale includes intellectual property and machinery, but does not involve legal action against directors or officers of Lordstown Motors.
Ford Motor (NYSE:F) – Ford has warned that proposed increases in fuel economy standards through 2032 by the U.S. government could cause “substantial economic hardship.” The company asked for reductions in the proposed increases. Additionally, Ford is recalling 35,000 Mustang Mach-E electric vehicles due to possible overheating of high-voltage battery contactors resulting in loss of driving power. Ford also announced a management change, promoting Kumar Galhotra to chief operating officer. On the front of the United Auto Workers strike, Ford announced additional layoffs of 150 workers in Michigan, bringing the total laid off to 2,730.
Stellantis (NYSE:STLA) – Stellantis aims for a 25% increase in light commercial vehicle (LCV) sales by 2027 to compete with Ford (NYSE:F). In 2022, Stellantis sold 1.6 million LCVs under various brands, generating $63.4 billion in revenue. Stellantis seeks to become a global leader in LCVs and expand in regions such as North and South America. Stellantis has introduced a new line of 12 refreshed vans. Its plan by 2030 includes doubling LCV revenues and having 40% of sales come from zero-emission vehicles.
Visa (NYSE:V), Mastercard (NYSE:MA) – Visa and Mastercard stocks declined on Wednesday following news that the Federal Reserve plans to reduce the fees banks can charge retailers for processing debit card transactions. The cap has been a subject of controversy, with retailers seeking reductions. The proposed changes are likely to trigger intense lobbying among the involved industries. Visa and Mastercard would see a drop in revenue if debit processing fees decrease. The move is praised by retailers, while the Fed seeks to balance interests.
Equifax (NYSE:EFX) – Equifax, the credit rating agency, revised downward its projections for 2023 due to a declining housing market. The company attributed this revision to current high interest rates, predicting that the US housing market will remain weak in the fourth quarter. Consequently, Equifax expects an approximately 34% reduction in mortgage inquiries throughout the year.
Evercore Inc (NYSE:EVR) – EQT AB has chosen Evercore to assist in a potential sale of Rimes Technologies, a data management company. Rimes’ value could reach $2.1 billion, with a formal sale process possibly beginning next year. The deliberations are at an early stage, with no guarantee of completion. EQT is also considering selling Sitecore, another investment. Other private equity firms are also exploring asset sales.
Nasdaq (NASDAQ:NDAQ) – A U.S. appeals court upheld Nasdaq’s board diversity rule, which requires listed companies to have women and minority directors on their boards or explain why they do not. The court dismissed lawsuits seeking to block the rule.
Earnings
Tesla (NASDAQ:TSLA) – Electric vehicle maker Tesla saw its shares fall 5.1% in premarket trading after missing estimates in third-quarter financial results. Tesla reported an adjusted profit of 66 cents per share on revenue of $23.35 billion, while analysts surveyed by LSEG had forecast a profit of 73 cents per share on revenue of $24.10 billion. The company also reported that its margins decreased compared to the same period last year.
Netflix (NASDAQ:NFLX) – Netflix saw shares rise 13.8% in premarket trading Thursday after beating third-quarter profit projections, surprising Wall Street. The company reported a profit of US$3.73 per share on revenue of US$8.54 billion, while analysts surveyed by LSEG had predicted a profit of US$3.49 per share and revenue of US$8. 54 billion. Additionally, Netflix saw stronger-than-expected subscriber growth, adding 8.76 million subscribers in the quarter, compared to the 5.49 million estimate made by Street Account analysts.
TSMC (NYSE:TSM) – TSMC reported a third-quarter net profit drop of 25%, but forecasts a recovery next year, driven by demand for personal computers and smartphones, as well as the growth of artificial intelligence. TSMC said third-quarter revenue fell 14.6% to $17.3 billion, in line with the company’s previous forecast of $16.7 billion to $17.5 billion. The company is cautiously optimistic, watching for signs of stabilization in the market. However, it recognizes the short-term uncertainty and has controlled its capital spending for this year.
Lam Research (NASDAQ:LRCX) – The semiconductor company’s shares fell approximately 2.8% in pre-market trading. This decline occurred despite Lam Research’s fiscal first-quarter results exceeding financial expectations. The company reported adjusted earnings of $6.85 per share on revenue of $3.48 billion, while analysts surveyed by LSEG had projected earnings of $6.12 per share on revenue of $3.41 billion.
SAP (NYSE:SAP) – The enterprise software maker confirmed its annual forecast for cloud business revenues after slightly underperforming expectations in the third quarter. Cloud revenue rose 16% to $3.66 billion, slightly below analyst estimates. Orders in the cloud area grew 25%. The company reaffirmed its full-year cloud revenue outlook of $13,287.4 to $13,481.8 billion. Chief Financial Officer Dominik Asam highlighted the resilience of the business despite macroeconomic challenges.
Nokia (NYSE:NOK) – Nokia reported that comparable quarterly net sales fell to approximately $5.62 billion from last year’s roughly $7.07 billion, falling short of an estimate of around US$6.0 billion, according to an LSEG survey. Nokia also announced that it plans to cut up to 14,000 jobs to reduce costs after a 20% drop in sales in the third quarter due to weak demand for 5G equipment. The company seeks to save between €800 million and €1.2 billion by 2026 and reduce its workforce by around 16%. Chief Executive Pekka Lundmark cited a challenging market, especially in the United States, where net sales fell 40%.
Abbott Laboratories (NYSE:ABT) – Abbott Laboratories said the market has exaggerated the negative impact on glucose monitoring sales due to competing diabetes medications. While there are immediate challenges with reimbursement and pricing, the company saw a 30.5% increase in FreeStyle Libre sales, exceeding expectations and boosting the stock. Abbott’s adjusted earnings per share were $1.14, beating estimates. The company adjusted its full-year earnings outlook to $4.42 to $4.46 per share, compared with its previous forecast of $4.30 to $4.50 per share.
Las Vegas Sands (NYSE:LVS) – Shares of the casino and resort company registered a 5.3% increase in pre-market trading after surpassing revenue estimates in the third quarter. The company announced revenue of US$2.8 billion, exceeding LSEG analysts’ projections, which predicted US$2.73 billion. Adjusted earnings were in line with Street expectations, coming in at 55 cents per share.
Kinder Morgan (NYSE:KMI) – Kinder Morgan reported below-expected Q3 earnings due to higher interest expenses. Shares are flat in premarket trading. Kinder Morgan reported adjusted earnings of 25 cents per share, compared with LSEG’s average estimate of 26 cents. The company cited higher interest rates and lower-than-expected commodity prices as factors, while the CEO is optimistic about 2024.
Discover Financial (NYSE:DFS) – Discover Financial announced third-quarter earnings of $2.59 per share, which was considerably below Wall Street’s expectations of $3.17 per share. During the quarter, the credit card company recorded a provision for credit losses of $1.7 billion, an increase of $929 million. This increase was driven by an increase in reserves, which grew by US$297 million.
Zions Bancorporation (NASDAQ:ZION) – Zions Bancorporation reported a decrease in profits. In the third quarter, Zions reported a profit of US$1.13 per share, below the expectations of analysts surveyed by LSEG, who expected US$1.15 per share. Additionally, net interest income was US$585 million, representing a 12% reduction compared to the same period in the previous year.
Morgan Stanley (NYSE:MS) – Morgan Stanley’s third-quarter profit was hit by slow trading and declines in investment banking revenue. Wealth management also had weaker results. The bank reported a 27% drop in investment banking revenue. Profit fell 9% to $2.4 billion, exceeding expectations. CEO James Gorman announced his departure, but a successor has not yet been announced. Fixed income underwriting revenue declined. The bank also set aside $134 million in provisions for credit losses.