Five things you need to know before the market opens on Friday, October 28:
1. -- Stocks Futures Lower As Big Tech Crashes Earnings Party
U.S. equity futures moved lower Friday, with the Nasdaq leading the declines, following another disappointing series of earnings updates from big tech companies that continue to raise questions about the resilience of the U.S. economy.
While Apple's September quarter numbers topped forecasts, muted iPhone growth rates, and a slowdown in services revenues, cast a pall over the tech giant's conservative holiday forecast. Amazon, meanwhile, missed Street estimates for December quarter sales by around $5 billion, and, like Apple, noted a bigger-than-expected headwind from the surging U.S. dollar.
The late Thursday updates cap a grim weak for Big Tech earnings, which saw notable declines for both Microsoft and Google, and have reset expectations for both third and fourth quarter S&P 500 profit totals despite a solid round of updates from industrial, consumer and pharmaceutical companies.
Stocks are finding relief, however, in the form of lower Treasury bond yields, which have retreated firmly over the past week amid fading bets on big Federal Reserve rates into the end of the year following dovish policy decisions from both the Bank of Canada and the European Central Bank earlier this week.
Benchmark 10-year note yields were last seen trading at 3.974%, down from last week's fifteen year high of 4.375%, while 2-year notes slipped to 4.351%. The CME Group's FedWatch, meanwhile, suggests only a 37.% chance of a 75 basis point rate hike in December - while noting the near certainty of similar move at the Fed's policy meeting next week in Washington.
Those moves could be tested today, however, by data from the Bureau of Economic Analysis, which will publish its September reading of the Fed's preferred inflation gauge, the PCE Price Index. at 8:30 am Eastern time.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are priced for a 30 point decline while those linked to the Dow Jones Industrial Average are priced for an 88 point dip. The tech-focused Nasdaq is priced for a 130 point decline on the back of a massive pre-market decline for Amazon.
In overseas markets, the region-wide Stoxx 600 was down 0.6% in early Frankfurt trading following a mixed series of third quarter earnings and data showing Germany's economy grew modestly over third quarter, defying recession fears.
Overnight in Asia, stocks remained pinned to two-year lows amid further declines in China, which is seeing renewed increases in Covid infections and a pullback in industrial profits. The region-wide MSCI ex-Japan index was marked 1.9% lower heading into the close of trading.
Japan's Nikkei 225 fell 0.88% following a dovish policy meeting for the Bank of Japan, which made no changes to its zero interest rate strategy but unveiled plans to buy more government bonds to fight a rise in market yields.
2. -- Apple Edges Higher After Q4 Earnings Beat, iPhone 14 Hopes
Apple (AAPL) shares edged higher in pre-market trading after a solid set of fourth quarter earnings offset a muted holiday quarter sales outlook for the world's biggest tech company.
"We did better than we anticipated, in spite of the fact that foreign exchange was a significant negative for us," CFO Luca Maestri told investors on a conference call late Thursday, noting that December quarter sales would suffer a a 10 percentage point year-on-year impact from the surging U.S. dollar.
Apple said holiday sales will likely grow less than 8% from last year, putting the overall figure at around $114 billion, with help from the launch of its new suite of iPhones. For the three months ending in September, sales rose 2% to a a record fourth quarter high of $90.15 billion
iPhone revenues were modestly shy of forecasts, at $42.62 billion, while services were also weaker, rising just 5% to $19.19 billion. China sales rose 6.25% to $15.47 billion
Apple shares were marked 0.42% higher in pre-market trading to indicate an opening bell price of $145.41 each.
3. -- Amazon Pummeled As Soft Holiday Sales Outlook Clouds Q3 Earnings
Amazon (AMZN) shares slumped sharply lower in pre-market trading after a disappointing holiday revenue forecast and slowing growth in its lucrative Web Services business more than offset better-than-expected third quarter earnings.
Amazon missed Street forecasts for both holiday quarter earnings, which it sees in the region of zero to $4 billion, as well as sales, which were pegged between $40 billion to $148 billion, compared to the Refinitiv forecast of around $155 billion.
Amazon said its second quarter profit was pegged at $2.9 billion, or 28 cents per share, while revenues rose 14.7% from last year to $127.1 billion, just shy of analysts' estimates of a $127.45 billion tally.
"As the third quarter progressed, we saw moderating sales growth across many of our businesses, as well as the increased foreign currency headwinds, and we expect these impacts to persist throughout the fourth quarter," CFO Brian Olsavksy told investors on a conference call late Thursday.
Amazon shares were marked 13.7% lower in pre-market trading to indicate an opening bell price of $95.79 each, extending the stock's year-to-date decline to around 42%.
4. -- Intel Powers Higher As Job, Cost Cut Plans Soothe Demand Concerns
Intel (INTC) shares jumped higher in pre-market trading after the chipmaker posted stronger-than-expected third quarter earnings while unveiling big job cuts that offset another pullback in its full-year sales forecast.
Intel's adjusted bottom line for the September quarter was pegged at 59 cents per share, well ahead of the Street consensus forecast, while revenues fell 15% to $15.3 billion.
Looking into the final months of the year, Intel said it sees revenues in the region of $63.5 billion, down form its prior forecast of between $65 billion and $68 billion.
"We are responding to the current environment by taking aggressive actions to reduce costs while mindfully protecting the investments needed to accelerate our transformation," CEO Pat Gelsinger told investors on a conference call late Thursday. "Inclusive in our efforts will be steps to optimize our headcount. These are difficult decisions affecting our loyal Intel family, but we need to balance increased investment with efficiency measures."
Intel shares, which have fallen more than 50% so far this year, were marked 5.25% higher in pre-market trading to indicate an opening bell price of $27.65 each.
5. -- Tesla Slips As Musk Takes On Another CEO Role After Twitter Takeover
Tesla (TSLA) shares moved higher in pre-market trading a CEO Elon Musk assumed another executive role at Twitter following his $44 billion takeover of the social media group and the firing of four of its most senior manages.
Twitter CEO Parag Agrawal, CFO Ned Segal, general counsel Seam Edgett and legal affairs chief Vijaya Gadde were all dismissed by Musk late Thursday, according to multiple media reports, as the world's richest man moved to become interim chief of the group - adding to his portfolio of roles that includes Tesla, SpaceX, Neuralink and the Boring Company.
Musk also plans to both reverse several 'lifetime' bans imposed on previous high-profile users, including former President Donald Trump, while also vowing to make Twitter 'The most respected advertising platform in the world."
Staff were bracing for a Town Hall meeting with Musk at the group's San Francisco headquarters on Friday, as well, amid reports of swingeing job and cost cuts. In the weeks and months ahead, however, Musk must also decide how he will both repay lenders who've provided $13 billion in takeover financing, and may well opt to sell a further chunk of his Tesla shares in order to raise the requisite cash.
Tesla shares were marked 1.1% lower in pre-market trading to indicate an opening bell price of $222.70 each. The stock has fallen around 28% since Musk made his Twitter acquisition public in early April.
