Futures Drop As Markets Sell News Of Government Reopening
Futures are slightly lower as the market sells the news that the US government has finally reopened, and as traders now seek to identify a near-term catalyst before NVDA’s Nov 19 earnings release while the data vacuum is likely to persist for at least several days. As of 8:00am ET, S&P futures are down 0.2% as the government reopening rally runs out of fuel; Nasdaq futures slip 0.1% with Mag7 names mixed premarket. Semis are under pressure, cyclicals are mixed, defensives are bid (healthcare and staples), and commodity-related plays are poised to outperform. Bond yields are flat/ up 1bp and USD weakness continues. In commodities, WTI is rebounding as precious metals lead (gold +92bp, silver +1.4%). With the government reopening the question is when we receive data again and we gave an answer yesterday. For today, the key data focus will be state-level jobless data released this afternoon and earnings, with bellwethers AMAT and DIS.
In premarket trading, tech stocks moved largely in line with the broader market amid worries that the the AI-led rally has gone too far, too fast. Investors have shunned tech in recent days in favor of defensive and value shares. Mag 7 stocks are mostly lower mixed (Meta +0.5%, Apple +0.1%, Amazon is flat, Tesla -0.9%, Microsoft -0.2%, Alphabet -0.5%, Nvidia -0.6%).
- Ardent Health (ARDT) shares sink 29% after the health-care services firm cut its adjusted Ebitda guidance for the full year. The reduced outlook trailed the average analyst estimate.
- Canadian Solar (CSIQ) rises 12% after the solar-equipment manufacturer reported third-quarter net revenue that beat the average analyst estimate.
- Cellebrite (CLBT) soars 18% after the digital-forensic firm said third-quarter adjusted Ebitda topped the high end of management’s guidance.
- Cisco (CSCO) rises 7% after the maker of networking equipment boosted its adjusted earnings per share guidance for the full year that beat the average analyst estimate as the firm captures more artificial-intelligence spending.
- Dlocal (DLO) shares are down 10% after the payment-solutions company reported third-quarter earnings. The result, although an earnings beat, pointed to weak underlying trends and softness in certain geographies, according to Citigroup.
- Dollar Tree (DLTR) drops 2% following a double-downgrade to sell by Goldman, which says any further upside for the retailer now “gets harder.”
- Firefly Aerospace (FLY) rises 20% after the spacecraft maker said it plans to resume launches of its Alpha rocket between late 2025 and early next year. The firm also reported revenue for the third quarter that beat the average analyst estimate.
- Flutter (FLUT) is down 2% after the FanDuel owner reported revenue for the third quarter that missed the average analyst estimate
- Ibotta (IBTA) drops 17% after the digital-marketing-software firm gave a weak fourth-quarter revenue forecast.
- KinderCare (KLC) sinks 19% after the daycare operator reduced its full-year outlook.
- Mersana Therapeutics (MRSN) rises 200% after Day One Biopharmaceuticals agreed to acquire the company. Shares of Day One (DAWN) are down 14%.
- Nike (NKE) is up 2% as Wells Fargo upgrades the sportswear giant to overweight from equal-weight, saying it is “lacing up for liftoff.”
- Sealed Air Corp. (SEE) climbs 21% premarket as Clayton Dubilier & Rice is exploring a potential acquisition of the company, according to people with knowledge of the matter.
- Walt Disney Co. (DIS) slips 3% after reporting sales that fell short of Wall Street estimates and said a slate of big-budget films, including a new Avatar picture, will weigh on results for the first quarter of its new fiscal year.
- Webtoon (WBTN) shares tumble 25% after the company — which lets creators and users make and discover digital comics — forecast revenue for the fourth quarter that fell short of expectations. The firm also reported revenue for the third quarter that Evercore called “lackluster.”
In corporate news, Alibaba is preparing an overhaul of its main mobile AI app in coming months to help it more closely resemble OpenAI’s ChatGPT. FanDuel is launching a prediction market product, allowing it to open up in states where traditional sports betting is illegal. Elsewhere, the FTC is said to be investigating whether proxy advisory firms ISS and Glass Lewis breached US antitrust laws by guiding shareholders on how to vote on politically charged topics. Fed’s Raphael Bostic announced he plans to retire at the end of his current term in February.
The shutdown is over, but it could take some time for normal operations to resume, and the October jobs and CPI reports are unlikely to be released at all. The jobs and the consumer price index reports for October are unlikely to be published, the White House said on Wednesday. The Bureau of Labor Statistics is expected to release a calendar in the coming days for other delayed data.
Money markets see about even odds of a Fed cut next month, while Boston Fed’s Collins and Atlanta Fed’s Bostic have both said they favor keeping rates steady to cool inflation. Bostic also announced his plans to retire at the end of his current term in February.
“There will be some caution around upcoming employment and inflation releases, particularly as we approach the Fed meeting that Powell has encouraged markets to treat with care,” said Florian Ielpo, head of macro and multi asset at Lombard Odier Investment Managers.
According to JPM, hedge fund positioning suggests room for a rally into the year end, though sector rotation indicates caution emerging over this year’s AI euphoria.
Notes of caution around the AI trade come as Bloomberg Intelligence equity strategists write that tech sector valuations have turned “from just hot to extreme.” Gains have been fueled by a revenue surge, not speculation, “but with premiums this stretched, fundamentals will need to keep sprinting just to stay in place,” they write. How that’s playing out in the market varies from company to company. Debt investors are taking a more cautious view of the latest junk bond deal aimed at funding a CoreWeave-tied data center construction, while Softbank has retreated more than 20% since recent highs on concerns over its AI investment strategy. On the other hand, Cisco shares are jumping premarket after AI demand fueled an upbeat earnings forecast.
“There’s a rotation going at the moment from stocks and indexes which outperformed this year, in favor of laggards,” said David Kruk, head of trading at La Financiere de l’Echiquier. “It’s both healthy for the market and absolutely not negative in terms of the direction of travel.”
In Europe, Stoxx 600 pares earlier gains to trade up 0.1%, with financial services and energy offsetting tech sector gains. ALK-Abello lead gains after the allergy solutions firm beat estimates and boosted its outlook for the year. Tech shares outperform, while the retail sector lags on a busy day for corporate earnings. Here are some of the biggest movers on Thursday:
- ALK-Abello shares jump as much as 14% to a record high after the Danish allergy solutions company boosted its outlook for the year following better-than-expected revenue in the third quarter.
- Bilfinger shares surge almost 11%, the most in more than seven months, as the industrial services company significantly raised its free cash flow outlook.
- Wizz Air shares jump as much as 17%, the most since February, after the budget airline reported earnings ahead of expectations.
- Burberry shares gain as much as 7.4% after the UK trench coat maker reported retail comparable sales for its second quarter that beat analyst estimates, turning positive for the first time in two years.
- Delivery Hero shares rise as much as 9.6% after the food delivery firm said growth of gross merchandise value is set to accelerate in 4Q.
- Convatec gains as much as 7.9% after delivering results in-line with expectations and tightening its organic revenue guidance for the full year.
- Azimut shares drop as much as 16%, the steepest fall since March 2020, after the Bank of Italy said it found significant governance and organizational issues in the firm’s Azimut Capital Management SGR unit.
- 3i Group shares tumble as much as 12%, the most in three-and-a-half-years, after reporting a slowdown in growth during October at discount retailer Action, the largest investment within its portfolio.
- Siemens shares fall as much as 5.2% after the German industrial firm’s results were hurt by currency headwinds.
- Aviva fell as much as 5.3% after the UK insurer reported third-quarter results and new financial targets which analysts said were mixed.
- Banco Sabadell shares dropped as much as 4.8% after the Spanish lender reported net income for the third quarter that missed the average analyst estimate.
Earlier in the session, Asian equities advanced for the fourth consecutive session, supported by gains in China and Japan. Stocks fell in Australia after unemployment figures. The MSCI Asia Pacific Index climbed as much as 0.5%, with Alibaba and Advantest among key gainers. Stocks also rose in Hong Kong and South Korea. Japan’s Topix index advanced for a fourth day, its longest winning streak in more than a month, amid a weakening of the yen. Meanwhile, Australia’s equity benchmark S&P/ASX 200 index fell to its lowest in more than three months, as upbeat jobs data dented expectations for central bank easing next year. The Australian unemployment numbers “effectively wiped out the prospects of rate cuts and sent equities lower,” said Matthew Haupt, a portfolio manager at Wilson Asset Management. The numbers suggest that the economy is “more resilient and maybe policy is not that restrictive.”
In FX, the Bloomberg Dollar Spot Index down by 0.2% and weaker against all G-10 currencies, with the Aussie dollar and Swedish krona outperforming.
In rates, Treasury yields trade near session highs into the early US session, with losses led by the front-end where 2-year yields are cheaper by 2bp on the day, after the longest government shutdown in US history ended. New 10-year yield near 4.10% is about 2bp higher than Wednesday’s auction result amid similar price action in bunds and gilts. Focal points of US session include 30-year bond auction and four scheduled Fed speakers. This week’s Treasury auctions conclude with $25 billion 30-year new issue at 1pm; Wednesday’s 10-year note auction tailed by 0.6bp. WI 30-year yield near 4.675% is ~6bp richer than last month’s, which tailed by 0.4bp
In commodities, gold climbs by $42 to $4,237/oz while silver gains 1.6% to ~$54, nearing its record high. Oil prices steady after the drop seen Wednesday, with the IEA once again raising its surplus estimate. Brent climbs 0.2% to $62.84/barrel.
The US economic calendar that was scheduled to include October CPI and weekly jobless claims is expected to continue to face delays as government reopens. Fed speaker slate includes Daly (8am), Kashkari (10:30am), Musalem (12:15pm) and Hammack (12:20pm)
Market Snapshot
- S&P 500 mini little changed
- Nasdaq 100 mini little changed
- Russell 2000 mini -0.1%
- Stoxx Europe 600 +0.1%
- DAX -0.4%
- CAC 40 +0.7%
- 10-year Treasury yield +1 basis point at 4.08%
- VIX +0.2 points at 17.66
- Bloomberg Dollar Index -0.2% at 1215.78
- euro +0.2% at $1.1618
- WTI crude +0.5% at $58.76/barrel
Top Overnight News
- The government shutdown officially ended and furloughed federal employees were set to return to work. Donald Trump signed a temporary funding bill into law, but it may take days to weeks to backpay workers and reinstate food aid, among other functions. BBG
- US President Trump's administration froze flight cuts at 6% rather than hiking to 8% on Thursday, according to the US Department of Transportation.
- As the US shutdown ends, that it is now up to Johnson and Thune to determine how/if the Republican's will address health care costs. Surmising that "the next few months are strewn with political landmines for the GOP": Punchbowl
- White House Economic Adviser Hassett said the government shutdown will impact this quarter's GDP and anticipates it to be between 1.5-2%, as well as noted that GDP for the year will be roughly 2% and that supply-side policies will allow growth without inflation. Hassett said he agreed with the last two Fed meetings that it was time to cut rates and noted the Fed is unlikely to cut 50bps, with the Fed more likely to do 25bps, while he added that he will do it if asked to be the Fed Chair.
- US data center developers are flooding utilities with inflated growth plans, muddying efforts to plan for future power needs with projects that may never materialize. Developers are approaching multiple utilities with the same project in a quest to find the lowest-priced power, leading to so-called phantom data centers. FT
- Volodymyr Zelenskiy implored EU allies to overcome their divisions on the use of frozen Russian assets, telling Bloomberg Television that fresh funding is critical for Ukraine to stay in the fight against Moscow. BBG
- Boston Fed President Susan Collins said Wednesday there should be a “high bar” for further easing by the Federal Reserve in the months ahead, projecting that the Fed should likely “keep policy rates at the current level for some time.” Also, NY Fed’s Perli said it won’t be long before the Fed is purchasing assets to grow the balance sheet as reserves are no longer abundant. WSJ, BBG
- China’s credit expansion slowed more than expected in October from a year ago, dragged down by weaker government bond sales and sluggish borrowing demand across the economy. BBG
- UK economic data for the month of Sept falls short across the board (GDP, industrial production, and manufacturing production all came in below the consensus). FT
- Alibaba is overhauling its main AI app to resemble OpenAI’s ChatGPT, adding shopping-focused features as it works to develop a full AI agent and build a user base. BBG
- BoJ Governor Kazuo Ueda said the central bank is aiming for moderate inflation accompanied by wage rises and economic improvement, signaling that its goal aligns with Prime Minister Sanae Takaichi's focus on reviving growth. Moreover, giving voice to the Takaichi administration's view that it was premature for the central bank to raise interest rates, Finance Minister Satsuki Katayama said inflation has yet to sustainably hit the BOJ's 2% target. RTRS
- Australian employment surged in October as firms took on more full-time workers, pulling the jobless rate down from a four-year high and bolstering a growing view that the current easing cycle may have run its course. RTRS
- Investors are turning bullish on small-cap stocks, as earnings growth outpaces their larger counterparts and cheap valuations are seen sparking an M&A wave. BBG
Trade/Tariffs
- US officials flagged they will reduce tariffs on popular groceries, as pressure mounts to address the cost-of-living crisis, according to FT.
- EU is set to propose a plan to the US that would implement the next phase of the trade agreement reached in the summer, according to Bloomberg citing people familiar with the matter.
- EU seeks to accelerate crackdown on cheap Chinese parcels, according to FT.
- India announced anti-dumping duties on some steel products from Vietnam.
- China's Foreign Ministry said G7 countries should also stop manipulating trade issues with China.
A more detailed look at global markets courtesy of Newsquawk
APAC stocks followed suit to the mixed performance in the US, with little fresh catalysts as the government shutdown ended. ASX 200 was pressured amid underperformance in the tech, real estate and energy sectors, while stronger-than-expected jobs data from Australia did little to inspire a turnaround. Nikkei 225 was choppy as participants reflected on recent earnings releases and firmer-than-expected PPI data.
Hang Seng and Shanghai Comp were mixed with strength in pharmaceuticals offset by weakness in energy and tech, while Chinese press noted that brokerage firms expect China's A-share market to continue to gain in 2026, with earnings growth anticipated to be around 4.7% next year.
Top Asian News
- BoJ Governor Ueda said they are aiming for stable inflation with a rise in wages and the BoJ is striving to achieve moderate inflation backed by wage growth by helping improve the economy, while he added the BoJ aims to achieve sustained economic growth that benefits the public. Ueda also said if long-term rates rise sharply in a way out of step with usual market moves, the BoJ is ready to respond flexibly, such as by increasing bond buying.
- South Korean Foreign Minister Cho asked US Secretary of State Rubio for a swift release of a joint fact sheet on last month's South Korea-US summit, while Rubio assured South Korea's Foreign Minister Cho that he would work with related US agencies for the release of a joint fact sheet on the summit, according to Yonhap.
- Alibaba (9988 HK / BABA) is preparing to overhaul the main mobile AI app in the coming months, in order to more closely resemble ChatGPT, via Bloomberg citing sources.
- China's Foreign Ministry on Japanese PM Takaichi's remarks, said despite strong protest from China, the PM has stubbornly refused to take that back. If Japan dares to intervene, that will constitute aggression. Japan must stop interfering in Chinese internals affairs.
European stocks opened mixed and traded choppily since, with pressure led by the DAX and FTSE 100. Softer UK Q3 GDP and weak manufacturing output hit UK sentiment and coupled with political uncertainty around PM Starmer weighs on the FTSE. Macro drivers were otherwise limited, though the morning brought a heavy earnings slate from names such as