MARKET WRAPS
Watch For:
Earnings from Alphabet, Canadian National Railway, Coca-Cola, General Electric, General Motors , Microsoft, RTX, Verizon, Visa
Today's Top Headlines/Must Reads:
- How the Highest Bond Yields in 16 Years Could Chill the Hot U.S. Economy
- Is It Time To Worry About Banks' Business Lending?
- Automakers and Suppliers Spar Over Car Data
Opening Call:
Stock futures advanced on Tuesday as Treasury yields fell further, while Microsoft and Alphabet earnings loomed.
After cresting on Monday just beyond 5% for the first time since 2007, the yield on the 10-year note continued to retreat toward 4.8% in early trading.
However, reviving an equity rally may require not just further declines in yields but also additional support from the ongoing third quarter corporate earnings season, analysts said.
"Overall, I suspect that a bottoming in both equities and Treasuries will be a process this week, and the fact that 1/3 of the S&P 500 reports earnings this week might help to aid in stabilization," Fundstrat said.
Premarket Movers
Agilysys reported fiscal second-quarter earnings and revenue that beat analysts' estimates and the maker of hospitality software boosted its fiscal 2024 revenue guidance. Shares rose 8.6%.
Arm rose on Monday after Reuters reported Nvidia is using Arm technology to design new PC chips. Arm stock advanced about 1% premarket Tuesday, putting it on track to build on Monday's near-4% gain.
Cadence Design Systems reported third-quarter earnings that beat analysts' expectations but its outlook for the fourth quarter disappointed investors. The stock was down 3.2%.
Cleveland-Cliffs was rising 2.6% after reporting third-quarter adjusted profit of 54 cents a share, better than analysts' expectations. CEO Lourenco Goncalves said the company's unit cost per ton of steel fell in the quarter as cost-cutting measures took effect.
Coinbase traded nearly 7% higher as the price of bitcoin surged.
Li-Cycle Holdings sank 45% Monday after it said it was pausing construction on a facility in Rochester, N.Y., citing high costs. The stock fell less than 1% ahead of the opening bell.
Logitech's second-quarter earnings beat Wall Street estimates and the company raised its forecast for fiscal 2024 revenue to $4 billion to $4.15 billion from its prior outlook of $3.8 billion to $4 billion. Shares rose 11%.
Redfin was rallying 9.6% after the real estate brokerage said Apollo Capital Management agreed to commit up to $250 million in financing.
Monday's Post-Close Movers
AGNC Investment said the tangible net book value per share fell in the third-quarter based on preliminary results, and had continued to slide in the nearly two months since because of market volatility. The trust said it expected to post a third-quarter total comprehensive loss of $1.02 a share. Shares fell 10%.
Herc Holdings will explore strategic alternatives for its studio management and lighting and grip-equipment rental business, Cinelease. Shares rose 5%.
Economic Insight
Surging exports should boost U.S. growth in the third quarter but this may be a short-lived phenomenon, Pantheon Macroeconomics said.
Exports are likely to have risen some 11%, while imports fell slightly, adding up to a trade contribution of around 1.5 points to third-quarter economic growth, it said ahead of the gross domestic product figures due later this week.
Headline growth could as such reach an impressive 5.3%, according to Pantheon's estimates. But the big boost in exports is partly a rebalancing of pandemic-era effects, and with the dollar riding high and demand cooling outside of the U.S., further gains will be a struggle, it said.
"We would be amazed if the fourth quarter were to bring a repeat of the 3Q spike."
Forex:
The euro could extend gains against a weak dollar in the near term, Danske Bank Research said, as the dollar dropped to one-month lows due to falling Treasury yields.
"We continue to prefer the topside in EUR/USD in the near-term, as we anticipate U.S. economic data starting to disappoint."
In this regard, it is worth keeping an eye on potential weakness in the service sector, Danske Bank said.
Preliminary purchasing managers data are due from Europe and the U.S. on Tuesday and will provide direction for both currencies.
Bonds:
Bond yields are expected to decline over the next six months as high borrowing costs weigh on the economy, J O Hambro Capital Management said.
"The usual economic downturns will be exacerbated by current bond yields, the highly inverted yield curve and, in particular, the rise in real yields," it said.
"We need to be aware that the economy can collapse under such pressures, similar to what we saw in March with the collapse of the regional banking sector in the U.S."
Energy:
Oil prices were slightly firmer, as worries lingered over the current situation in Israel and Gaza.
Elsewhere, the IEA in its latest World Energy Outlook said it expected fossil-fuels demand to peak before the end of the decade, with increasing solar power helping to meet demand.
Metals:
Base metal prices inched higher on a weakening dollar, while gold traded flat.
"Macro money flows are choppy and volatile ahead of important dollar drivers later this week," Peak Trading Research said.
It added that the number-one change in macro mood has been a falling dollar, with investors looking elsewhere amid a rising U.S. deficit and gridlock over a new speaker of the house.
Peak said markets will now be looking to Thursday, with U.S. GDP data and the European Central Bank's policy decision due.
Citi said iron-ore shipments from countries other than the top three exporters --Australia, Brazil and South Africa--fell below 12% of Chinese demand in September as momentum in iron-ore prices stalled.
It highlighted supplies from so-called nontraditional sources that include India and Peru as being very sensitive to prices, given those places account for the industry's highest-cost ore.
TODAY'S TOP HEADLINES
Barclays Trims 2023 UK Net Interest Margin View After 3Q Income Missed Expectations
Barclays lowered its U.K. net interest margin guidance for 2023 and posted lower-than-expected third-quarter income growth, with income at its corporate and investment bank missing expectations.
The British bank on Tuesday said its now expects a net interest margin for Barclays UK of between 3.05% and 3.10% for the year. It had lowered its 2023 margin guidance to no more than 3.20% at its half-year results in July with a view of around 3.15%.
Novartis Raises Earnings Guidance After Key Drugs Boost Profit, Sales
Novartis raised its full-year earnings guidance for the third time this year after it reported higher net profit and sales for the third quarter, boosted by strong sales of key drugs.
The Swiss pharmaceutical giant said Tuesday that it now expects core operating profit to grow this year by a percentage in the mid to high teens range. It had previously anticipated a growth rate from low double percentage digits to mid teens excluding Sandoz, the generic-drugs unit that was spun off earlier this month.
Microsoft Earnings Will Raise More Questions About AI. The Answers Could Take Time.
There's little debate on Wall Street that Microsoft will be a long-term winner from the move toward artificial intelligence. But as for when generative AI could materially boost the company's financial performance? That remains a matter of considerable debate.
Investors will be looking for answers later today when Microsoft (ticker: MSFT) reports results for its fiscal first quarter ended Sep 30. They're likely to be disappointed.
The Corporate Retreat From Hong Kong Is Accelerating
International companies began trickling out of Hong Kong a few years back, uneasy about the financial hub's tightening ties to mainland China. That first smattering of departures is now turning into a broad retreat involving banks, investment firms and technology companies.
The number of U.S. companies operating in the city has fallen for four years in a row, by Hong Kong's count, hitting 1,258 in June 2022, the fewest since 2004. Last year, mainland Chinese companies with regional headquarters in Hong Kong outnumbered American ones for the first time in at least three decades.
This Bond ETF Is Having a Brutal Year. Time to Buy Long-Term Treasuries?
One of America's most popular bond funds is in the doghouse for poor performance. It may be time to start buying.
The $37.6 billion iShares 20+ Year Treasury Bond ETF (ticker: TLT), which tracks an index of Treasuries with maturities of 20 years and more, is supposed to be the ultimate haven fund-the place to hide when equities and other riskier assets tank. Returns have been dismal.
Hamas Sets Free Two More Hostages but Talks Held Up Over Release of Larger Group
Hamas set free two more civilian hostages on Monday, but negotiations over a possible release of a group of 50 captives stumbled over the militant group's demand that Israel allow fuel deliveries into Gaza, according to officials familiar with the talks.
Hamas said it was releasing the two hostages, a pair of elderly women, on humanitarian grounds. Egyptian officials confirmed that the two hostages were released at Gaza's Rafah border crossing.
Trump's Incendiary Rhetoric Costs Him in Courtroom, Risks Votes in 2024
DERRY, N.H.-Donald Trump has attacked judges and prosecutors as "thugs" and psychopaths, called for shoplifters to be shot, suggested now-retired Gen. Mark Milley could be executed for treason, and joked about last year's violent assault of Rep. Nancy Pelosi's (D., Calif.) husband.
All the while, the former president has riled up supporters who largely think Trump is being persecuted. "The silent majority can no longer remain silent," read a recent fundraising email.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Canadian National Railway 3Q
First Quantum 3Q
Economic Calendar (ET):
(MORE TO FOLLOW) Dow Jones Newswires
10-24-23 0606ET
