Wednesday October 20th


Stock futures are little changed as investors digest earnings results

U.S. stock index futures were little changed Wednesday, after the S&P 500 on Tuesday posted its fifth straight winning session as strong earnings numbers lift sentiment. Futures contracts tied to the Dow Jones Industrial Average lost 7 points. S&P 500 futures were flat and Nasdaq 100 futures were about unchanged as well. Netflix posted its hotly-anticipated third-quarter earnings report on Tuesday after the market closed, with the streaming giant adding 4.4 million subscribers during the period. Wall Street analysts were expecting 3.84 million additions, according to estimates from StreetAccount. However, the shares, which are up 20% in the last three months, were down 2% in premarket trading. Deutsche Bank downgraded Netflix after the report, saying its stock valuation was hard to justify with revenue growth set to slow next year. The firm also said strong fourth quarter subscriber additions are already baked into the stock. United Airlines also posted quarterly results after the bell on Tuesday, with the company beating analyst expectations on the top and bottom line amid an ongoing rebound in travel demand. United shares were higher by about 2% in premarket trading. Biogen shares rose 2% in early morning trading after reporting its quarterly results. The company beat analyst estimates on earnings and revenue and raised its full year guidance. Ford shares up 2% in premarket trading after Credit Suisse upgraded the auto company on its EV shift and predicted a 30% rally in the stock. More than 70 S&P 500 components report earnings this week. IBM, Tesla, CSX and Las Vegas Sands are among the names set to report after the market closes. So far investors have largely cheered results from the batch of third-quarter earnings that have hit the market since the banks kicked things off last week. Of the S&P 500 components that have reported thus far, 82% have topped expectations, according to FactSet. However, Jeff Buchbinder, equity strategist for LPL Financial, said investors shouldn’t expect the beats that companies posted as they emerged from the depths of the pandemic. “We have used most of the superlatives we know to describe corporate America’s stunning performances over the past two earnings seasons,” he said. “We expect solid earnings gains during the upcoming third-quarter earnings season, but upside surprises will be smaller. Unfortunately, we won’t need as many superlatives.” But Fundstrat’s Tom Lee said the market could still rally more than 6% by the end of the year despite the “jagged year of progress” it’s had. He upped his S&P 500 price target 100 points to 4,800, citing bitcoin’s current price rally, a signal of a strong risk-on environment, as well as declining Covid cases and economic resilience. “We believe a strong risk-on environment is underway,” Lee said in a note to investors late Tuesday. “We do not think consensus is that bullish. We already know that investors got very pessimistic in September... However, the improvement in market technicals, such as clearing the 50-day moving average, is actually suggesting that underlying trends are getting stronger.” The S&P 500 added 0.74% on Tuesday, while the Nasdaq Composite advanced 0.71%. Both saw their fifth straight day of gains, the longest daily winning streak since late August. The Dow advanced nearly 200 points, or 0.56%, for its third positive session in the last four days. Johnson & Johnson had the most positive impact on the 30-stock benchmark, while Procter & Gamble was the largest drag. With stocks’ Tuesday advance, the major averages are approaching their all-time highs. The Dow is 0.49% below its record, while the S&P and Nasdaq Composite sit 0.58% and 1.78% below their highwater marks. Elsewhere in the market, bitcoin was in focus on Tuesday as the cryptocurrency inched closer to its all-time high. The first bitcoin-linked ETF — the ProShares Bitcoin Strategy ETF — began trading on Tuesday, pushing the cryptocurrency to a session high of $64,350, according to date from Coin Metrics, just shy of its April 14 record of $64,899. Shares in Asia-Pacific were mixed on Wednesday as China kept its benchmark lending rate unchanged. The Hang Seng index in Hong Kong rose 1.35% to close at 26,136.02 leading gains among major markets in the region. Mainland Chinese stocks closed lower, with the Shanghai composite slipping 0.17% to 3,587 while the Shenzhen component dipped 0.328% to 14,452.25. Japan’s Nikkei 225 climbed 0.14% to close at 29,255.55 while the Topix index edged fractionally higher to 2,027.67. South Korea’s Kospi shed 0.53% on the day to 3,013.13. Oil prices slipped on Wednesday after the Chinese government stepped up efforts to tame record high coal prices and ensure coal mines operate at full capacity as Beijing moved to ease a power shortage. Chinese coal prices and other commodity prices slumped in early trade, which in turn pulled oil prices down from an uptick earlier in the day. Brent crude futures dropped 86 cents, or 1%, to $84.20 a barrel, paring a 75-cent rise in the previous session, but still lingering close to multi-year highs. U.S. West Texas Intermediate (WTI) crude futures for November, which expires on Wednesday, fell $1.00 to $81.96 a barrel. Gold prices edged lower on Wednesday as surging U.S. bond yields dented the metal’s appeal and bets for upbeat corporate earnings lifted risk-on sentiment. Spot gold dropped 0.1% to $1,767.71 per ounce by 0100 GMT. The metal rose as much as 1.2% on Tuesday before giving up most of those gains as Treasury yields rallied. U.S. gold futures fell 0.1% to $1,768.40. U.S. benchmark 10-year Treasury yields surged to their highest since May 20, raising the opportunity cost of holding non-yielding bullion.