Market Wraps
Watch For:
Durable Goods, Weekly Jobless Claims, Advance Estimate GDP, EIA Weekly Natural Gas Storage Report, earnings from Altria, Amazon.com, Bristol Myers Squibb, Comcast, Ford, Honeywell, Intel, Mastercard, Merck, Southwest Airlines, UPS
Today’s Headlines/Must Reads
– Ford Reaches Tentative Labor Deal With UAW Six Weeks Into Historic Strike
– What to Watch For in Thursday’s GDP Report: How High Did Consumers Push Economic Growth?
– New Speaker Mike Johnson’s To-Do List: A Looming Funding Deadline and Israel, Ukraine Aid
Opening Call:
Poorly received earnings from some big technology companies continued to weigh on markets in early trading on Thursday.
“This morning risk-off has continued,” Saxo Bank said. “One driver seems to be the market recalibrating technology valuations amid rising real yields and that cycle could go on for a while.”
Indeed, the 10-year Treasury yield rose again to within a few basis points of 5%, before falling back.
“Unfortunately for stocks, robust economic data comes at an unruly price, with the strong housing market likely contributing to a higher rate environment,” SPI Asset Management said.
Overseas
Stocks lost ground in Asia and Europe. Japan’s Nikkei 225 fell more than 2% and the Stoxx Europe 600 fell close to 1%.
European bonds held steady. German and Italian benchmark bond yields were little changed ahead of the European Central Bank’s monetary-policy decision. Economists broadly expect the central bank will hold interest-rates steady.
Premarket Movers
Align Technology was down 25% after it reported third-quarter adjusted earnings and revenue that missed analysts’ estimates.
Ford was up 1.8% after the UAW union said it reached a tentative contract agreement with the auto maker.
Third-quarter earnings at IBM edged Wall Street estimates, and the company’s CEO said IBM’s push into artificial intelligence was starting to pay off. The stock rose 1.5%.
Mattel’s third-quarter earnings beat expectations and the toy maker raised its profit forecast for the fiscal year. The stock, however, dropped 10% in premarket trading after Mattel warned of slowing demand as it enters the holiday season.
Meta Platforms posted third-quarter earnings that beat analysts’ expectations but shares fell 3.9% after a warning from the company’s CFO about weaker advertising demand so far in the fourth quarter.
ServiceNow posted better-than-expected third-quarter adjusted earnings and raised its full-year financial guidance as it continues its aggressive push to add generative artificial intelligence across its product line. Shares rose 4.2%.
Economic Insight
The U.S. economy is likely to have been boosted by strong domestic consumption and foreign trade in the third quarter but this spike will soon deflate, Pantheon Macroeconomics said.
Gross domestic product for the quarter–due to be published later on Thursday–could have risen some 4.9%, according to Pantheon’s estimates, far outstripping growth in the first half. But this is largely based on performance from domestic consumption and surging exports, neither of which is likely to last into the fourth quarter.
“Real after-tax incomes fell outright in July and August, and we expect to see another dip in September too, so it would be unreasonable to expect spending to continue rising at anything like the third quarter’s likely 4.5% pace,” Pantheon said.
Forex:
The dollar hit a three-week high against a basket of currencies due to weaker equities, higher Treasury yields and the U.S. electing a new House Speaker, and the currency could get an additional boost from a strong GDP print, ING said.
Energy:
Oil prices slipped back, weighed by a stronger dollar and with Israel seemingly delaying its invasion of Gaza.
Analysts noted the risk premium from the war has started to diminish. “Crude oil prices have given up nearly half of the gains made after the Hamas attack on Israel,” ING said.
“The risk of an escalation can not be ruled out, but economic concerns weigh on prices in the short term.”
Metals:
Base metals and gold ticked up, with investors eyeing the ECB monetary policy decision and U.S. GDP data as key price drivers.
Peak Trading Research said the ECB will likely pause rate hikes today. “The big question: Will this be a ‘hawkish pause’ that strengthens the Euro or will Lagarde point to new geopolitical threats and worsening data.”
Peak added that investors are also expecting a strong U.S. GDP print at 4.5% on-year growth, which would likely push the dollar higher.
Today’s Top Headlines
Morgan Stanley Names Ted Pick as Next Chief Executive
Morgan Stanley said Wednesday that it named Ted Pick as its next chief executive to succeed longtime CEO James Gorman, ushering in a new era for the Wall Street powerhouse.
Pick, who leads Morgan Stanley’s investment-banking and trading operations, was one of three finalists selected as possible successors for Gorman, who said in May that he would step down from the CEO role he has held since 2010.
Silver Lake Looks to Privatize Hollywood Agency Titan Endeavor
Private-equity giant Silver Lake said it is working on a proposal to take private Endeavor Group Holdings, the owner of talent agencies WME and IMG.
“Silver Lake firmly believes in Endeavor’s business and is not interested in selling its shares in Endeavor to a third-party nor in entertaining bids for assets that are a part of Endeavor,” the firm wrote in a statement. Silver Lake owns about 71% of the voting stake in Endeavor.
Berkshire Adds to Stake in Occidental, Now Holds Over 25%
Berkshire Hathaway lifted its stake in Occidental Petroleum in recent days, making its first purchase since late June. Berkshire bought 3.9 million shares, increasing its stake to 228 million shares worth $14.5 billion.
Berkshire Hathaway (ticker: BRK/A) bought the stock on Monday through Wednesday, according to a Form 4 filing with the Securities and Exchange Commission. It now holds a 25.8% stake in Occidental Petroleum (OXY), whose shares rose 1.2% Wednesday to $63.47.
Standard Chartered’s Profit Slides on Impairments, Operating Costs
Standard Chartered PLC’s third-quarter underlying net profit dropped 30%, weighed by higher credit impairment and operating expenses.
The London-based lender on Thursday said its underlying net profit came to $644 million, compared with $915 million a year earlier.
ECB seen pausing as economy sputters
The European Central Bank is expected to pause on Thursday as inflation cools while activity stagnates.
The ECB is expected to keep its deposit rates at 4%. The decision will be delivered in Athens, Greece – it makes one rate decision per year outside of its Frankfurt headquarters – at 1:45 p.m. local time, or 7:45 a.m. Eastern.
Japanese yen sinks to weakest level against the dollar in a year as key BoJ meeting looms
The U.S. dollar touched its highest level against the Japanese yen in a year on Wednesday as rising Treasury yields helped push the greenback higher against most of its rivals.
As yields rose on Monday, the dollar USDJPY traded as high as 150.32 yen, according to Tullett Prebon data. That’s the highest level intraday for the currency pair since Oct. 21, 2022, when the dollar traded as high as 151.95 yen, its strongest level since the early 1990s.
Xi Jinping Is Looking for Someone to Blame for China’s Property Bust
With China’s property bust threatening to sink the country’s economic recovery, Xi Jinping is looking for someone to blame.
After putting the billionaire founder of Evergrande, a heavily indebted property firm, under investigation for possible crimes, Beijing is expanding its probes to include bankers and financial institutions that facilitated developers’ risky behavior, people familiar with the matter say.
GOP Senators Propose Bill Splitting Off Israel Aid From Ukraine Funding
WASHINGTON-A group of Republican senators introduced a stand-alone bill that would send billions of dollars in aid to Israel but not Ukraine, underscoring the challenges facing a much larger $106 billion Biden administration proposal that includes more funding for Kyiv.
The group of GOP senators argues that separating the Israel aid would prevent the assistance from being bogged down in the House, where the number of Republicans opposed to funding Ukraine aid is growing, and now makes up more than half the GOP conference.
Mike Johnson Elected House Speaker, Ending Three Weeks of GOP Feuding
WASHINGTON-The House elected GOP Rep. Mike Johnson of Louisiana as speaker Wednesday, with the staunch conservative overcoming the divisions that had paralyzed the chamber after a band of hard-liners ousted Kevin McCarthy three weeks ago.
The choice of Johnson, who led an effort to help former President Donald Trump try to overturn the 2020 election results, came after House Republicans nominated and then dumped a series of leadership candidates. With a speaker now in place, lawmakers can return to work, with many eager to pass aid for Israel and address a looming government-funding deadline next month.
Israel Agrees to U.S. Request to Delay Invasion of Gaza
Israel has agreed, for now, to a request from the U.S. to delay its expected ground invasion of Gaza so the Pentagon can place air defenses in the region to protect U.S. troops, according to U.S. officials and people familiar with the Israeli planning.
The Pentagon is rushing to deploy nearly a dozen air-defense systems to the region, including for U.S. troops serving in Iraq, Jordan, Kuwait, Saudi Arabia, Syria and the United Arab Emirates, to protect American forces from missiles and rockets. U.S. officials have so far persuaded the Israelis to hold off on sending tanks and foot soldiers into Gaza to end Hamas rule until those pieces can be placed in the region, as early as later this week.
Source: Dow Jones Newswires