Futures Flat As Oil Surges
US equity futures are flat and European stocks headed for a record high as third-quarter earnings continued to flow in. As of 8:20am, S&P and Nasdaq futures are little changed. Pre-market, Mag 7 are mostly flat except for a -3% selloff in TSLA given the underwhelming earnings release last night which saw profits tumble despite record revenues (pulled forward due to expiration of tax credits) on sharply higher costs. Quantum-computing stocks rallied on a WSJ report the US Is mulling buying stakes (Rigetti Computing (RGTI US) +9.1%, IonQ (IONQ US) +8.7%). Overnight, the most important headline was US’s sanction on the two largest oil company in Russia which sent WTI crude surging 5.5% higher this morning. As a result, bond yields are 1-5bp higher led by 30y, and the 10Y trading just below 4.00%. The USD is higher. Commodities are mostly higher led by oil and precious metals (silver +1.1%). US-China trade talk is set for Friday in Malaysia. Today's economic calendar calendar includes September existing home sales (10am) and October Kansas City Fed manufacturing activity (11am); weekly jobless claims data have been suspended by the shutdown.
In premarket trading, Mag 7 stocks are mixed: Tesla (TSLA) falls 3.5% after profit plunged despite a record quarter of vehicle sales (Alphabet +0.4%, Amazon +0.3%, Microsoft +0.2%, Apple -0.06%, Nvidia -0.2%, Meta -0.1%)
- Quantum-Computing Stocks Rally on Report US Is Mulling Stakes (Rigetti Computing (RGTI US) +9.1%
IonQ (IONQ US) +8.7%, D-Wave Quantum (QBTS US) +12.5%) - Dow Inc. (DOW) rises 6% after the chemicals company reported third-quarter operating Ebitda that beat the average analyst estimate.
- Honeywell (HON) gains 4% after the industrial company reported third-quarter adjusted earnings per share that surpassed analysts’ expectations.
- International Business Machines Corp. (IBM) is down 7% after it reported disappointing revenue in two key software categories, including its closely watched Red Hat unit.
- Las Vegas Sands (LVS) rises 5% after the casino operator reported adjusted earnings per share for the third quarter that beat the average analyst estimate.
- LendingClub (LC) soars 11% after the online lender provided a guidance range for new 4Q originations with a midpoint above estimates. JPMorgan upgraded the stock to overweight.
- Moderna (MRNA) is down 4% after the company said its vaccine to prevent cytomegalovirus, a common cause of birth defects, failed to meet its goal in a late-stage trial.
- Molina Healthcare (MOH) is down 18% after the health insurer cut its adjusted profit guidance for the full year, citing higher medical cost trends in all its businesses.
- T-Mobile US Inc. (TMUS) falls 1% after posting third quarter results.
- Tractor Supply (TSCO) falls 3% after the retailer narrowed its full-year guidance range for net sales, with the midpoint toward the lower end of the previous range.
- Ribbon Communications (RBBN) falls 14% after the developer of software for large phone companies posted third quarter profit that disappointed. Guidance for fourth quarter revenue also missed expectations.
- Ventyx Biosciences (VTYX) surges 105% after the drug developer said mid-stage clinical trial results showed significant reductions in cardiovascular risk factors in patients with obesity.
In corporate news, the Wall Street bonus pool is expected to break records this year as big banks reap profits from soaring stocks and a return to more dealmaking after a long drought. Musk, meanwhile, spent the end of Tesla’s earnings call pleading with investors to ratify his upcoming $1 trillion pay package. Polymarket is said to be holding early conversations with investors and looking to raise money at a valuation between $12 billion and $15 billion.
Oil prices jumped after the Trump administration sanctioned Russian state-owned group Lukoil and Rosneft, ramping up the pressure on Russian President Vladimir Putin to negotiate an end to the war in Ukraine. Brent has jumped by 5% to start testing $66/barrel. The oil price spike may accelerate a shift in equities to value from growth sectors.
While valuations on the S&P 500 appear stretched, drawdowns in recent weeks have been brief as investors look for better entry points. The “artificial intelligence ecosystem” and banks have shown strong earnings, according to Arun Sai, a senior multi-asset strategist at Pictet Asset Management. “We’re seeing froth skimmed off the top, which so far I think is a healthy correction,” Sai said. “You still don’t have evidence to suggest there is anything fundamentally wrong with the US economy or with markets” given strong earnings and the lack of US government data, he said.
While the market remains very steady at the index level, big rotations are going on below the surface, with momentum trades like AI losing steam, as earnings misses pile up in the tech sector and geopolitical tensions simmer. Oil jumped after the US announced sanctions on Russia’s biggest producers. Tesla shares are lower premarket after quarterly profit plunged, while Elon Musk’s vision of an AI-focused future failed to convince. IBM also disappointed, adding to a slate of poor tech earnings this week including SAP, Netflix and Texas Instruments. Intel is due to report after the close.
The meme stock mania of the past few days may also be passing, with Beyond Meat and Krispy Kreme both lower in premarket trading. A four-day surge that sent Beyond Meat shares up more than 1,300% pushed short sellers’ paper losses to more than $120 million from last week’s record low close, according to data from S3 Partners. Some shorts have been scrambling to exit, while others have doubled down on bets against the plant-based protein producer.
Trade tensions are also never far away. China said Vice Premier He Lifeng plans to meet with US officials in Kuala Lumpur from Oct. 24 to 27 for the next round of talks. The Trump administration is weighing export restrictions against China that would bar the purchase of a wide swath of critical software, a White House official said Wednesday.
“Because of the trade tensions, there was a narrative of caution going into third-quarter season and that has now abated, given the stronger numbers,” said Nina Stanojevic, an investment specialist at St James Place. “People were looking to this earnings season to see if there was any flow-through from the trade tariffs but it seems that the market has taken it in its stride so far.”
The markets are jittery about the US-China tensions, and “though it could probably be just another TACO situation, and even though everyone knows that’s how it goes, there are still people who have to react until things settle down,” said Ryuta Otsuka, a strategist at Toyo Securities.
Looking at Q3 reporting season, earnings so far have been broadly positive, helping to support equities as a mix of macro fears injected a note of nervousness into global markets. The Trump administration said it’s considering curbs on software exports to China, risking another escalation of the trade dispute. Traders are also pinning their hopes on another Federal Reserve interest-rate cut later this month, even as they await delayed September inflation data due to be released on Friday.
European equities rose on Thursday, with energy shares leading gains as oil rallied after the US imposed sanctions on Russian producers. Travel and technology shares are the biggest laggards. Stoxx 600 rises 0.2% to 573.25 with 277 members down, 313 up, and 10 little changed. Here are the biggest movers:
- Energy is the best-performing sector in Europe on Thursday as oil rallies after the US announced sanctions on Russia’s biggest producers, with President Donald Trump ramping up pressure to negotiate an end to the war in Ukraine
- LSE Group shares rise as much as 9%, after the data company and stock exchange operator reported third-quarter results that analysts described as strong and raised its guidance for 2025 adjusted Ebitda margin to the top end of the prior range
- Nokia shares surge as much 13%, the most since April 2021, as analysts cheer a strong report from the Finnish digital infrastructure firm in which net sales beat expectations; Jefferies sees strong momentum building in the quarter
- DSV gains as much as 7.6%, the most since April, after the Danish logistics group’s third-quarter report showed positive impacts from cost control as well as an earlier-than-expected boost from the recent Schenker acquisition, according to analysts
- Kering shares rise as much as 10%, hitting the highest level since April 2024, after the luxury-goods maker reported better-than-expected third-quarter revenue
- Dassault Systemes shares drop as much as 17%, the most since 2002, after the software firm lowered its revenue forecast for the year. The shares are trading at the lowest since April 2020
- RELX falls as much as 2.7% after the UK information and analytics firm reported results in line with analysts’ estimates. Underlying trends indicate the company is on track to meet FY expectations
- Evolution shares drop as much as 13% to the lowest intraday level in almost five years. The Swedish gambling operator’s revenue and earnings missed estimates in the third quarter, with Asia a particular source of weakness
- Carrefour shares drop as much as 5.9%, the most since June, after the grocer reported 3Q LFL sales excluding fuel and calendar effects that missed analyst estimates
- Roche shares drop as much as 3.4%, the most since May 12, after the Swiss drugmaker reported weaker-than-expected sales for the third quarter. Vontobel called the upgraded earnings guidance for the full year an “unconventional move”
Asian stocks declined, in risk-off trading after news that the White House is considering curbs against China that would bar the purchase of a wide swath of critical software. The MSCI Asia Pacific Index dropped as much as 0.7% before paring losses. TSMC and SoftBank were among the biggest drags, tracking a continued selloff in global AI shares, while tech stocks also slid in Hong Kong. Japan and South Korea led losses among regional benchmarks. The US is considering curbs similar to those implemented against Russia if China doesn’t back down from its threat to restrict rare-earth exports, Reuters reported earlier. While it’s not clear how serious the effort is, it caused fresh anxiety for traders ahead of trade talks planned for next week between Donald Trump and Xi Jinping. China announced in the afternoon that Vice Premier He Lifeng plans to meet with US officials in Kuala Lumpur from Oct. 24 to 27 for the next round of trade talks. Chinese equities staged a rebound later in the day, with the onshore benchmark CSI 300 Index ending the day 0.3% higher, while the Hang Seng China Enterprises Index rose 0.8%. A pivotal political gathering on the nation’s development plan for the next five years was also in focus, with authorities expected to deliver fresh policy measures to support growth. Elsewhere, Indonesia’s stock benchmark climbed more than 1%, leading gainers around the region. Here are the most notable Asian movers
- Japanese shipbuilders including Namura Shipbuilding and Sumitomo Heavy Industries surged after the Nikkei reported that an industry group will soon announce a ¥350 billion capital investment plan. Meanwhile, Tesla supplier stocks including Renesas Electronics and TDK fell after the EV maker reported worse-than-expected profit.
- Sands China shares gain as much as 4.6% in Hong Kong after the casino operator’s parent reported an adjusted EBITDA for its Macau operation in the third quarter that beat estimates.
- Pop Mart International Group Ltd. shares plunged on Thursday, reflecting renewed concerns about the toy maker’s long-term sales outlook despite a strong third-quarter performance.
- LS Electric shares surge as much as 13% to a record high as NH Investment & Securities and other brokerages raise their price targets for the South Korean energy equipment maker following a 19% on-year jump in quarterly sales.
- Giant Biogene shares rise as much as 14% in Hong Kong, the most since March 2023, after the co.’s controlling shareholder increased stake in the firm.
Chinese officials conclude their Fourth Plenum gathering in Beijing, with a readout expected later in the day. Treasury Secretary Scott Bessent is expected to huddle with his Chinese counterparts over the weekend ahead of the Trump-Xi talks.
In FX, an earlier gain in the dollar eases, with the Bloomberg Dollar Spot Index little changed and Japanese yen underperforming. The US currency was supported by its 0.5% gain versus the yen to 152.66; the Japanese currency was pressured by expectations of fiscal expansion under the country’s new prime minister and fading prospects for interest rate hikes
In rates, Treasuries hold losses accumulated during London morning as oil prices surged after the US announced sanctions on Russia’s biggest producers, with yields higher by 2bp-5bp and curve steeper. Treasuries lead losses for most bond markets globally. The US 10-year yield is near 3.99% after touching 3.936% Wednesday, with 2s10s and 5s30s curves wider by about 1.5bp near 52bp and 99bp respectively. The US session includes 5-year TIPS auction, following strong demand for Wednesday’s 20-year bond sale. Yields are higher across Europe.
In commodities, WTI crude futures remain more than 5% higher on the day after climbing as much as 5.8% after the Trump administration sanctioned Russian state-owned group Lukoil and Rosneft, ramping up the pressure on Russian President Vladimir Putin to negotiate an end to the war in Ukraine. Brent has jumped by 5% to start testing $66/barrel. Gold turned positive after two days of steep declines as the Trump administration’s latest trade threats introduced fresh tension into US-China relations.
Today's economic calendar calendar includes September existing home sales (10am) and October Kansas City Fed manufacturing activity (11am); weekly jobless claims data have been suspended by the shutdown
Market Snapshot
- S&P 500 mini little changed
- Nasdaq 100 mini little changed
- Russell 2000 mini +0.3%
- Stoxx Europe 600 +0.2%
- DAX -0.4%
- CAC 40 +0.3%
- 10-year Treasury yield +4 basis points at 3.99%
- VIX +0.3 points at 18.91
- Bloomberg Dollar Index little changed at 1213.5
- euro little changed at $1.16
- WTI crude +5.2% at $61.52/barrel
Top Overnight News
- Republican Senators are said to consider a bill to keep SNAP program benefits flowing during the government shutdown, according to POLITICO.
- Bessent said they might see CPI coming down next month and the month after, while he thinks housing prices are a lagging indicator, and they are going to see substantial tax refunds for Americans.
- President Trump has announced substantial new sanctions on Russia’s two biggest oil companies as frustration in Washington grows over the war in Ukraine. The new sanctions target Lukoil and Rosneft as well as nearly three dozen of their subsidiaries. WSJ
- U.S. President Donald Trump said on Wednesday he expected to reach agreements with Chinese President Xi Jinping when they meet in South Korea next week that could range from resumed soybean purchases by Beijing to limits on nuclear weapons. Trump also plans to discuss China’s purchases of Russian oil an dhow to stop Russia’s war in Ukraine. RTRS
- A Treasury analysis has found the Trump administrations economic policies have put the US on track to narrow its yawning deficit using a mix of spending cuts and tariff revenue to improve the fiscal outlook. FT
- China said Vice Premier He Lifeng plans to meet with US officials (Bessent, Greer) in Kuala Lumpur from Oct. 24 to 27 for the next round of trade talks, aimed at defusing a standoff between the world’s two largest economies. BBG
- Trump's administration is in talks to take equity stakes in quantum computing firms: WSJ.
- President Trump said interest rates are down, while he criticized the Fed chair, and noted that he will be doing something very quickly to get beef prices down.
- The new junior party in Japan's ruling coalition is likely to give Prime Minister Sanae Takaichi the green light she needs for a big spending package, but will stop short of supporting a revival of Abenomics-style fiscal and monetary policies. RTRS
- BOJ watchers pushed back their forecast for the next interest-rate hike after Sanae Takaichi took over as PM. Only 10% of economists now predict a rate hike on Oct. 30, down from 36% in the previous survey. BBG
- Indian refiners are poised to sharply curtail imports of Russian oil to comply with new U.S. sanctions on two top Russian producers, industry sources said on Thursday, potentially removing a major hurdle to a trade deal with the United States. The change comes as India faces punishing 50% tariffs on its exports to the US and tries to negotiate a trade deal. RTRS
- Canada aims to double its non-US exports by 2035, PM Mark Carney said in a rare prime-time televised speech. He also plans to introduce an immigration strategy to lure talent that might’ve otherwise gone to the US. BBG
- Retail traders are cementing themselves as a force in markets. One proxy for their involvement is stock trades at off-exchange venues, which are poised to make up 50% of total volume this year for the first time. BBG
- Investors are more bullish than before according to the latest Barron’s money manager survey – 47% anticipate higher stock prices over the next 12 months vs. just 28% in the spring (although 57% believe stocks are overvalued). Barron’s
Trade/Tariffs
- US President Trump’s administration is considering a plan to restrict globally produced exports to China made with or containing US software, while the new export controls under consideration by the US could curb exports on a wide range of goods to China, and the plan would retaliate against China's rare earth export restrictions if adopted, according to Reuters sources. However, the sources said that the measure, details of which are being reported for the first time, may not move forward, and administration officials could announce the measure to put pressure on China but stop short of implementing it, while narrower policy proposals are also being discussed.
- US President Trump said a long meeting is scheduled with Chinese Pre