Pre-market Market Movements 1. On October 22 (Wednesday), US stock futures for the three major indices fell across the board. As of the time of writing, Dow futures were down 0.00%, S&P 500 futures dropped 0.04%, and Nasdaq futures decreased 0.27%. 2. As of the time of writing, Germany's DAX Index was down 0.21%, the UK's FTSE 100 gained 0.90%, France's CAC 40 fell 0.33%, and the Euro Stoxx 50 Index was down 0.21%. 3. As of the time of writing, WTI crude oil rose 1.96% to $58.36 per barrel, while Brent crude oil increased 1.83% to $62.44 per barrel.
Market News US Market's Strong Bullish Sentiment Turns Cautious! Bank of America Warns of Five Key Risks. Since the US bull market began more than three years ago, Bank of America stock strategist Savita Subramanian has remained a steadfast optimist. However, recently, even she and her team have found reasons for concern regarding the future direction of the stock market. Subramanian identified five emerging risks that could impact the S&P 500, including: the S&P 500's valuation being at extremely high levels; accumulating signals of a potential bear market; risks tied to gaps in government data; risks related to speculative activity and private lending; and liquidity shocks. She cautioned that private credit risks may spill over into banks, with forced institutional selling of index funds possibly leading to significant drops, advising a focus on individual stock selection.
Federal Reserve Almost Certainly to Cut Rates Next Week, but the Path for Next Year Remains Uncertain! A survey of economists indicates the Federal Reserve will cut rates by 25 basis points next week, with another cut anticipated in December; however, there is significant divergence among surveyed economists regarding rate levels at the end of next year. Predictions for the end-of-year rates vary widely, from 2.25%-2.50% to 3.75%-4.00%. The uncertainty is partly driven by market speculation over who will succeed Chair Powell when his term ends next May. The current Federal Reserve is facing dual risks: tariffs potentially exacerbating already high inflation and a further softening labor market. The Fed appears to prioritize the latter, which led to the first 25 basis point rate cut since December 2023 last month.
Goldman Sachs Chief Economist: Market Projections for US GDP are Too Optimistic. Goldman warns that market estimates for US GDP might be overly optimistic, as the data vacuum during the government shutdown could ultimately drag employment data down from an otherwise optimistic outlook. Goldman’s Chief Economist Jan Hatzius emphasized that estimates for US GDP surged sharply during the government shutdown, with the second quarter expected to be 3.8% and the third quarter projected at 3.3%. Some estimates suggest even higher figures; for instance, the Atlanta Fed noted on October 17 that third quarter GDP could be as high as 3.9%. Regarding employment, Hatzius noted that surveys in the manufacturing and services sectors indicated a labor market outlook index that is “well below 50,” consistent with stagnation or even a contraction in jobs. He added, “Since labor market indicators typically provide more reliable information about current economic growth than preliminary GDP estimates, this weakness further reinforces our belief that the GDP signals for the second and third quarters are too optimistic.”
US Inflation Rising Again? Alternative Metrics Show Surge at Two-Year High. According to PriceStats data based on online retail prices, US inflation rose 2.6% year-on-year in September, marking the highest level in two years, and this has now increased for five consecutive months, primarily driven by significant rises in prices of goods like furniture and household appliances. Additionally, data indicate that the consumer price index for durable and personal goods rose 6% month-on-month in September, the fastest monthly increase since June, largely due to rising costs of personal care items and communication equipment.
US Government Shutdown Continues to Second Longest in History, Economic Impact Intensifies. The US government shutdown has now lasted 22 days, making it the second-longest shutdown in US history. The impasse persists as both parties are unable to reach an agreement on soon-to-expire healthcare subsidies. Lawmakers and aides believe that the shutdown could extend into November, potentially exceeding the 35-day shutdown experienced during President Trump's last term. The economic impact of this shutdown will further intensify this week. Economist Anna Wong suggested the shutdown could lead to a slight temporary increase in the unemployment rate, which will return to 4.3% once the government resumes operations.
Stock-Specific News Star-Studded Lineup Faces Earnings “Ambush”! Netflix Misses Earnings Targets Due to Brazil Tax Case. Netflix (NFLX.US) announced that a tax dispute with Brazil affected its third-quarter earnings. The earnings report showed that Netflix's Q3 revenue grew 17% to $11.5 billion, in line with Wall Street expectations. However, due to tax expenses in Brazil, earnings per share came in at $5.87, below analysts’ forecasts of $6.94; quarterly operating profit was $3.24 billion, about $400 million lower than the company’s own forecast and analysts' estimates. Nevertheless, the company’s outlook for the current quarter (Q4) is largely in line with Wall Street predictions. As of the time of writing, Netflix shares fell nearly 7% in pre-market trading.
Under the Shadow of Tariffs, “King of Simulation” Texas Instruments Signals Slowing Recovery. Texas Instruments (TXN.US) reported Q3 revenue that increased 14% year-on-year to $4.74 billion, slightly above market expectations of $4.65 billion; earnings per share were $1.48, below market expectations of $1.49. The company expects its Q4 overall revenue to be in the range of $4.22 billion to $4.58 billion, with the midpoint below the market's expectation of approximately $4.5 billion; earnings per share are projected to be around $1.26, again missing market expectations of $1.39. The guidance provided by Texas Instruments suggests that clients are slowing their orders in response to worsening global trade tensions and a relatively weak economic environment. As of the time of writing, Texas Instruments shares fell nearly 8% in pre-market trading.
Revenue Growth of 15% and Profit Surge of 27%, Alliance West Bank (WAL.US) Eases Regional Bank Fears with “Better Than Expected Earnings.” The bank reported a 15.2% year-on-year revenue increase in Q3 to $938.2 million, with net profit soaring over 27% year-on-year to $250.2 million, equivalent to earnings per share of $2.28, significantly surpassing expectations from most Wall Street analysts, effectively alleviating previously tense market sentiment. Last Thursday, the loan fraud case disclosed by two regional banks—Zion Bank and Alliance West Bank—had unsettled the market. As of the time of writing, Alliance West Bank shares increased nearly 2% in pre-market trading.
Intuitive Surgical (ISRG.US) Q3 Revenue Soars 23%, Strong Growth in Da Vinci Procedures. Global technology leader in minimally invasive care and pioneer of robotic-assisted surgery, Intuitive Surgical, announced Q3 revenue of $2.51 billion, reflecting a year-on-year increase of 23%; GAAP earnings per share stood at $2.40, exceeding $1.84 from the same period last year. This significant revenue growth was primarily driven by an increase in surgery volume and deployment of the Da Vinci surgical systems. The company launched 427 Da Vinci systems and 50 Ion systems in Q3; surgical volumes grew approximately 20% year-on-year, with Da Vinci procedures increasing by about 19% and Ion procedures rising about 52%. As of the time of writing, Intuitive Surgical shares surged over 17% in pre-market trading.
Barclays (BCS.US) Records Additional £235 Million Provision for Auto Credit but Surprises with Buyback and Higher Profit Guidance for the Year. The bank announced an additional provision of £235 million (approximately $314 million) to compensate auto finance customers. Concurrently, it raised the profit forecast for this year, stating that the tangible return on equity (RoTE) should exceed 11%, compared to the previous expectation of around 11%; the forecast for full-year net interest income was slightly increased to £12.6 billion. The bank also announced a £500 million share buyback program. As of the time of writing, Barclays shares rose over 4% in pre-market trading.
AT&T (T.US) Reports Mixed Q3 Performance, Surpasses Expectations in New Wireless Subscriber Additions. AT&T’s Q3 revenue was $30.7 billion, falling short of market expectations of $30.87 billion; adjusted earnings per share were $0.54, broadly in line with market forecasts. However, bolstered by bundled packages and aggressive promotional campaigns around the launch of the latest iPhone—helping the company attract more customers in a competitive market—AT&T’s addition of wireless subscribers exceeded market expectations. Data indicates that AT&T added 405,000 new monthly paying wireless subscribers in Q3, surpassing the expected 334,100.
Surging Prices Offset Shutdown Impacts on Main Copper Mine, Teck Resources (TECK.US) Posts Nearly 20% Earnings Growth Exceeding Expectations. The company’s core adjusted earnings for Q3 grew to CAD 1.17 billion (approximately USD 836 million), up from CAD 986 million in the same period last year, benefiting from rising copper and zinc prices, as well as additional revenue from by-products. Q3 revenue grew 18% year-on-year to CAD 3.38 billion. The company stated that its Q3 earnings saw nearly a one-fifth increase due to rising metal prices offsetting the production disruptions at its main copper mine in Chile.
Short Squeeze Trend Drives Beyond Meat (BYND.US) to Continue Soaring! Following colossal gains of 128% and 146% on Monday and Tuesday respectively, Beyond Meat shares surged nearly 75% again in pre-market trading on Wednesday. This rapid increase is chiefly attributed to a short squeeze following last week’s completion of a debt-to-equity conversion. Analysts have indicated that Beyond Meat's recent price surge is clearly driven by short-squeeze dynamics rather than fundamental factors, as the stock's current valuation fully reflects its challenging transition prospects. Additionally, reports suggest that Beyond Meat is set to expand its product offerings in over 2,000 Walmart stores, potentially helping the company escape its operational difficulties.
Important Economic Data and Events Preview On October 23 at 04:00 Beijing time, Federal Reserve Governor Barr will speak on "Financial Inclusion". Earnings Forecasts for Thursday Morning: Tesla (TSLA.US), IBM (IBM.US), Alcoa (AA.US), SAP (SAP.US), Lam Research (LRCX.US). Pre-Market on Thursday: Nokia (NOK.US), STMicroelectronics (STM.US), Lloyds (LYG.US), Freeport-McMoRan Copper & Gold (FCX.US), T-Mobile US (TMUS.US), Union Pacific (UNP.US), Southwest Airlines (LUV.US), American Airlines (AAL.US).