Editorial StaffStock futures edge higher as inflation worries resurface; Housing data in focus as building slows, mortgage rates surge; Netflix share rocket after Q3 earnings blowout; United Airlines leaps as travel boom lifts Q3 earnings, outlook and Tesla earnings on deck amid mixed delivery figures, Musk distractions.
Here are five things you must know for Wednesday, October 18:
1. Stock Futures Edge Higher As Inflation Worries Resurface
U.S. equity futures edged modestly higher Wednesday, with stocks looking to extend their two-day rally in the face of another set of disappointing U.K. inflation data that clipped investor sentiment and pushed the dollar higher against its global peers.
Britain’s September inflation rate jumped to a fresh 40-year high of 10.1% last month, official figures indicated Wednesday, in a move that is likely to trigger faster and deeper rate hikes from the Bank of England.
Ordinarily, markets would glide past regional inflation readings, but with the BoE poised to begin selling bonds from its multi-trillion balance sheet, and the government still in chaos following the scrapping of its weeks-old economic plans, investors are worried that Britain’s inner turmoil could spillover once again into the broader financial system.
The U.S. dollar index, which tracks the greenback against a basket of global currencies and often acts as a proxy for broader risk sentiment, rose 0.28% overnight to 112.441 while benchmark 10-year Treasury bond yields added 4 basis point to change hands at 4.065%.
That leaves investors in a relatively defensive mood heading into the Wednesday session, with housing and mortgage data due before the start of trading and third quarter earnings from Tesla and IBM expected after the closing bell.
The CBOE group’s key volatility gauge was also on the move, rising from yesterday’s levels to 31.26 points, suggesting daily swings of around 72.7 points over the next 30 days for the biggest U.S. benchmark.
Oil markets will also be in focus Wednesday ahead of both the Energy Department’s weekly stockpile data, due at 10:30 am Eastern time, as well the details of President Joe Biden’s plan to sell-off the remaining portion of crude taken from the 180 million barrels taken Strategic Petroleum Reserve earlier this year.
WTI crude futures were marked 8 cents lower in overnight trading at $82.74 per barrel, while Brent contracts slipped 22 cents to $89.91 per barrel.
On Wall Street, futures contracts tied to the S&P 500, which has gained 6.3% since Thursday’s open, are indicating a 4 point opening bell gain while those linked to the Dow Jones Industrial Average are priced for a 20 point bump. The tech-focused Nasdaq is priced for a 39 point gain.
Stocks in Europe were lower, with London’s FTSE 100 down 0.53% and the region-wide Stoxx 600 falling 0.28% in early Frankfurt trading. Overnight in Asia, Japan’s Nikkei 225 ended 0.37% higher as the yen fell to another 32-year low of 149.184 against the dollar, while the MSCI ex-Japan index fell 1.11% into the final hours of trading.
2. — Housing Data In Focus As Building Slows, Mortgage Rates Surge
Housing and mortgage data will take center-stage in the pre-market Wednesday with updates on construction and borrowing costs released prior to the opening bell.
The Mortgage Bankers’ Association is likely to show another jump higher in benchmark mortgage rates, which could top the 7% level and have risen more than a full percent since early August.
Government data is also expected to show a further slowdown in single-family home construction over the month of September, as well as an overall 5% decline in housing starts as projects are delayed amid the ongoing surge in building costs and the pullback in demand linked to higher mortgage costs.
The impact of Hurricane Ian, which hammered the southeast in late September, probably won’t be reflected in the data, but is likely to support regional building figures in the coming months as insurance claims kick-in.
3. — Netflix Share Rocket After Q3 Earnings Blowout
Netflix (NFLX) shares surged higher in pre-market trading after the streaming and media service shocked investors with much better-than-expected third quarter earnings ahead of its ad-supported platform launch.
Netflix added 2.41 million paid subscribers over the quarter, the company said, more than double the Street forecast and well ahead of the loss of around 1.2 million over the first six months of the year.
Hits such as ‘Stranger Things’ and ‘Dahmer – Monster: The Jeffrey Dahmer Story’ drove north American gains, while ‘Extraordinary Attorney Woo’ was a bit factor in the solid figures from the Asia Pacific region.
The gains helped the group post a Street-beating bottom line of $3.10 per share on revenues of $7.925 billion. Netflix said it will add around 4.5 million subs over the final three months of the year, essentially matching analysts’ forecasts, with revenues of around $7.776 billion and a bottom line of 36 cents per share.
Netflix shares were marked 12.35% higher in pre-market trading to indicate an opening bell price of $270.60 each.
4. — United Airlines Leaps As Travel Boom Lifts Q3 Earnings, Outlook
United Airlines Holdings (UAL) shares soared higher in pre-market trading Wednesday after the carrier posted stronger-than-expected third quarter earnings while forecasting firmer end-year profits thanks to the ongoing boom in global travel demand.
United posted a bottom line of $2.81 per share, topping Street forecasts by 53 cents, on revenues of $12.9 billion.
Looking into the final months of the year, United said it sees profits in the region of $2 to $2.25 per share, more than double Street forecasts, with total revenue per available seat mile, a key industry metric, rising 25% from 2019 levels,.
The U.S. Transportation Security Administration said Tuesday that it screened 2.495 million passengers on Sunday October 16, the largest single-day weekend total since February of 2020.
United Airlines shares were marked 5.5% higher in pre-market trading to indicate an opening bell price of $39.29 each.
5. — Tesla Earnings On Deck Amid Mixed Delivery Figures, Musk Distractions
Tesla (TSLA) shares edged higher in pre-market trading ahead of the clean energy carmaker’s third quarter earnings after the closing bell.
Tesla is expected to report a bottom line of $1 per share, up from 62 cents over the same period last year, on record revenues of $21.96 billion.
Hot production numbers from China where Tesla re-started its Shanghai giga factory following scheduled maintenance in July, helped third quarter deliveries hit 343,830 units for the three months ending in September, the highest total ever recorded for the Texas-based automaker but modestly below analysts’ forecast.
Demand, however, is expected to wane over the final months of the year as China, the world’s biggest EV market, remains choked by Beijing’s ‘zero Covid’ policies and countries in Europe and north America pull back on big-ticket spending amid looming recession fears and the ongoing surge in energy prices.
Tesla also faces the specter of a big share sale from CEO Elon Musk, who may need to raise an extra $3 billion to fund his portion of the planned $44 billion takeover of Twitter, which he indicated earlier this month he plans to complete despite concerns over the level of fake accounts allegedly found on the social media platform.
Tesla shares were marked 0.1% higher in pre-market trading to indicate an opening bell price of $220.40 each.
Source: The Street
