Benzinga - by Shanthi Rexaline, Benzinga Editor.
Mixed earnings have dampened the market’s risk appetite, as indicated by U.S. stock futures, which suggest a mixed opening on Wednesday. The reaction to earnings news has been varied, with Microsoft Corp.’s (NASDAQ:MSFT) report receiving a positive reception from the Street, while Alphabet, Inc.’s (NASDAQ:GOOGL) (NASDAQ:GOOG) underwhelming Cloud revenue growth has not been well-received by investors.
The spotlight now turns to the third member of the “Magnificent Seven,” namely Meta Platforms, Inc. (NASDAQ:META), scheduled to report after the close. With numerous headwinds in play, analysts have stressed the importance of robust corporate profit growth to sustain valuations, while bond yields are on the rise ahead of next week’s Federal Reserve rate-setting meeting.
Cues From Tuesday's Trading:
Optimism surrounding third-quarter earnings and relief in bond yields provided the impetus for investors to remain engaged in the stock market on Tuesday.
The major averages opened higher and showed gradual strength in early trading as investors digested earnings releases ahead of the market open. Although the indices gave up most of their gains by mid-session, renewed buying interest emerged in the afternoon. After a steady rally, they closed notably higher, albeit below their session highs.
The tech-heavy Nasdaq Composite recorded gains for the second consecutive session, while the S&P 500 Index broke a five-session losing streak.
Most sectors, excluding energy stocks, advanced during the session. Utilities experienced a significant rally, and stocks in the communication services, consumer discretionary, consumer staples, materials, and real estate sectors also attracted notable buying interest.
US Index Performance On Tuesday
| Index | Performance (+/-) | Value |
| Nasdaq Composite | +0.93% | 13,139.87 |
| S&P 500 Index | +0.73% | 4,247.68 |
| Dow Industrials | +0.62% | 33,141.38 |
| Russell 2000 | +0.82% | 1,679.50 |
Analyst Color:
Weighing in on the current market fundamentals, John Lynch, chief investment officer at Comerica said the equity market will likely continue to experience volatility until clarity emerges on the geopolitical front and corporate profits begin to support recent price gains.
The analyst sees the benchmark U.S. 10-year Treasury yield stabilizing in the 4.75%-5% as “global investors balance supply concerns with the need to seek yield and safety in these challenging times.” As a result, the U.S. dollar will also likely firm slightly above the current levels, he said.
From a technical perspective, the analyst noted that the S&P 500 has been weakening since late July, down about 8% from the year-to-date high. If the index breaks below its 200-day moving average, the next support could be in the 4,000-4,050 range.
Premising on better-than-expected results that will likely provide the equity markets with “fundamental ballast,” Lynch said the index would be fairly valued in the 4,400 range by the year-end.
Futures Today
Futures Performance On Wednesday
| Futures | Performance (+/-) |
| Nasdaq 100 | -0.56% |
| S&P 500 | -0.33% |
| Dow | +0.14% |
| R2K | -0.57% |
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) slipped 0.34% to $422.20 and the Invesco QQQ ETF (NASDAQ:QQQ) fell 0.55% to $357.16, according to Benzinga Pro data.
Upcoming Economic Data:
The Mortgage Bankers Association will release the results of its mortgage applications volume survey at 7 a.m. EDT. Data for the week ended Oct. 13 released last Wednesday showed mortgage applications volume falling 6.9% on a seasonally adjusted basis compared to the previous week.
"Applications decreased to their lowest level since 1995, as the 30-year fixed mortgage rate increased for the sixth consecutive week to 7.70 percent – the highest level since November 2000," said Joel Kan, MBA's economist.
The Commerce Department is scheduled to release the new home sales report for September at 10 a.m. EDT. Economists expect new home sales to come in at a seasonally adjusted annual rate of 680,000 units in September compared to a 675,000-unit rate in August.
The Energy Information Administration will release its weekly petroleum status report at 10:30 a.m. EDT.
The Treasury will auction five-year notes at 1 p.m. EDT.
See also: Best Futures Trading Software
Stocks In Focus:
- Microsoft shares rose over 3.3% in premarket trading after the software giant reported fiscal year 2024 first-quarter results that exceeded estimates and issued in-line fourth-quarter guidance.
- Alphabet shares slid about 6.7% despite the search giant’s earnings beat, as investor attention turned toward lukewarm cloud revenue growth.
- Texas Instruments, Inc. (NASDAQ:TXN) moved down over 5.3% following its quarterly results. Payment processing firm Visa, Inc. (NYSE:V) fell over 1.50% despite the company’s fourth-quarter beat.
- General Dynamics Corporation (NYSE:GD), Norfolk Southern Corporation (NYSE:NSC), Old Dominion Freight Line, Inc. (NASDAQ:ODFL) and T-Mobile US, Inc. (NASDAQ:TMUS) are among the notable companies reporting their quarterly results before the market open.
- Those reporting after the close include Canadian Pacific Kansas City Limited (NYSE:CP), Edwards Lifesciences Corporation (NYSE:EW), International Business Machines Corporation (NYSE:IBM), KLA Corporation (NASDAQ:KLAC), Mattel, Inc. (NASDAQ:MAT), Meta Platforms and O’Reilly Automotive, Inc. (NASDAQ:ORLY).
Crude oil futures fell 0.26% to $83.52 in early European session on Wednesday following their 2.05% pullback on Tuesday.
The yield on the 10-year Treasury note rose 0.025 percentage points to 4.865% on Wednesday.
The Asian markets showed listlessness on Wednesday as they reacted to the mixed cues from Wall Street overnight. China’s decision to launch a 1 trillion yuan ($137 billion) sovereign bond issue offered some encouragement to traders in the region in the hopes that growth in the world’s second-largest economy will likely revive.
European stocks traded moderately lower in late-morning trading on Wednesday.
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This illustration was generated using artificial intelligence via MidJourney.
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