Here are five things you must know for Wednesday, October 12:
1. -- Stock Futures Higher As Earnings, Inflation Data Loom
U.S. equity futures moved higher Wednesday as investors braced for another potentially volatile session on Wall Street heading into a series of inflation readings and earnings reports that could upend the market's modest October rally.
With U.S. stocks on a five-day losing streak, and tech in the throes of its second bear market of the year, investors are looking for any suggestion of optimism ahead of the third quarter earnings season as profit growth slows and the Federal Reserve doubles-down on its commitment to fight the fastest inflation in four decades.
Collective S&P 500 profits are expected to grow by 4.1% to around $464 billion before rising modestly to around 5.2% over the final three months of the year, according to data from Refinitiv.
The Fed's relentless rate hike path, however, which has helped lift the U.S. dollar to its highest levels in two decades, will act as a headwind to any earnings growth momentum, and comments last night from Cleveland Fed President Loretta Mester suggest that will remain the case for some time.
“Monetary policy is moving into restrictive territory and will need to be there for some time in order to put inflation on a sustained downward path to our 2% goal,” Mester said in a speech at the Economic Club of New York Tuesday. “I do not anticipate any cuts in the fed funds target range next year.”
Minutes of the Fed's September meeting, set for release at 2:00 pm Eastern time today, will likely cement that hawkish stance, adding further upward pressure on the dollar and lifting benchmark 2-year note yields closer to 4.3%.
The CME Group's FedWatch, meanwhile, is indicating an 80% chance of a 75 basis point rate hike from the Fed next month, with a 30.8% chance of a similar-sized move in December.
Central banks around the world are playing catch-up to the Fed's inflation fight, as well, with the Bank of Korea taking its base lending rate 50 basis points higher overnight to a 10-year high of 3%.
In Europe, where inflation accelerating at a double-digit pace and the economy is teetering on the brink of recession, the European Central Bank is dropping hints that it will begin selling some of the $3.2 trillion in bonds it purchased as part of its quantitative easing program once benchmark interest rates get closer to a 'neutral' level of around 2%.
Heading into the start of the trading day on Wall Street, futures tied to the S&P 500 are indicating a 23 point opening bell gain, while those linked to the Dow Jones Industrial Average are priced for a 138 point advance. Contracts tied to the tech-focused Nasdaq, which closed at a July 2020 low last night, are indicating another 92 point gain.
Overnight in Asia, the region-wide MSCI ex-Japan benchmark nudged 0.07% into the green over the final hours of trading, while the Nikkei 225 was marked 0.17% lower on the session in Tokyo as the yen resumed its recent slump to trade at a 24-year low against the U.S. dollar.
In Europe, the region-wide Stoxx 600 index was up 0.16% with Britain's FTSE 100 rising 0.33%.
2. -- Bank of England Re-States Friday Bond Buying Deadline
The Bank of England confirmed Wednesday that its emergency intervention into the bond market will last only until the end of the week, countering reports that indicated it could extend purchases in order to allow pension funds more time to rebalance their debt-heavy portfolios.
BoE Governor Andrew Bailey told an audience at the International Monetary Fund's autumn meetings that the Bank will be "out by the end of this week" and warned pension funds that "you've got three days left now. You've got to get this done."
The Bank accelerated its emergency bond-buying effort earlier this week, citing a "material risks" in the $2.1 trillion market triggered in part by the government's since-abandoned plans to slash taxes and boost borrowing in order to kick-start growth in the broader U.K. economy.
The pound edged lower, to 1.057 against the U.S. dollar following Wednesday's BoE statements, while benchmark 20-year gilt yields rose past the 5% mark, a level last seen when the BoE first intervened in markets in late September.
3. -- Intel Shares Higher On Report Of Big Job Cuts
Intel Corp. (INTC) shares moved firmly higher in pre-market trading following a report that suggested the chipmaker is preparing to cut thousands of jobs in the coming weeks amid the ongoing slump in demand for personal computers.
Bloomberg reported late Tuesday that Intel is looking to reduce its overall global headcount, with the bulk of the cuts aimed at the chipmaker's sales and marketing divisions. Bloomberg said layoff plans would be detailed alongside the group's third quarter earnings on October 27.
Intel slashed its full-year sales forecast on July 29 to between $65 billion and $68 billion, following weaker-than-expected second quarter earnings, as softening demand, supply chain disruption and run-away inflation continue to hammer PC demand. Current quarter sales, Intel added, would likely range between $15 billion and $16 billion
Intel shares were marked 1.5% higher in pre-market trading to indicate an opening bell price of $25.41 each, a move that would still leave the stock down more than 50% for the year.
4. -- Credit Suisse Extends Slump On Report of New DoJ Probe
Credit Suisse (CSGKF) shares were under pressure again in European trading following a report from Bloomberg News that suggested the Swiss bank is facing another probe by the U.S. Department of Justice.
Bloomberg said the investigation, which comes eight years after Credit Suisse agreed to pay a $2.6 billion tax evasion settlement, is focused on whether the bank helped clients hide assets from U.S. authorities, including the Internal Revenue Service.
The reports follow a move by Credit Suisse, the country's second-largest bank, to steady investor concerns following several quarters of losses, a massive hit from the collapse of the Archegos hedge fund in 2021 and questions over the leadership of chairman Axel Lehmann.
The bank said in a statement Wednesday that it's co-operating with "extensively" with U.S. authorities, telling Reuters that it "does not tolerate tax evasion.
Credit Suisse shares were marked 3.4% lower in European trading at €4.231 each, extending their year-to-date decline to around 53%.
5. -- PepsiCo Tops Earnings Forecast On Frito-Lay Strength
PepsiCo (PEP) shares jumped higher in pre-market trading after the group posted stronger-than-expected third quarter earnings, while boosting its full-year profit forecast, as impressive gains from Frito-Lay continued to power the beverage giant's bottom line.
PepsiCo said core earnings for the three months ending in September were pegged at $1.97 per share, well ahead of Street forecasts, on overall revenues of just under $22 billion.
North American revenues at Frito Lay, its snacks division, came in at $5.563 billion, up nearly 20% from last year, while beverages revenues were up 3.6% at $6.635 billion.
"We are encouraged by the progress we are making on our strategic agenda, and remain committed to investing in our people, brands, supply chain, and go-to-market systems and winning in the marketplace," said CEO CEO Ramon Laguarta.
PepsiCo shares were marked 1.6% higher in pre-market trading to indicate an opening bell price of $165.20 each.
