Stock Market Update

The S&P 500 futures are down 42 points and are trading 0.6% below fair value, the Nasdaq 100 futures are down 150points and are trading 0.7% below fair value, and the Dow Jones Industrial Average futures are down 200 points and are trading 0.5% below fair value.

Stock futures are lower. Mega caps show pre-open losses, which has contributed to the early bias, as participants digest earnings results from Microsoft (MSFT) and Meta Platforms (META). 

Rising Treasury yields are another limiting factor this morning. The 10-yr yield is up one basis point at 4.28% and the 2-yr yield is up three basis points to 4.18%.

Today's economic calendar features the Fed's preferred gauge on inflation in the form of PCE Price Indexes at 8:30. Other data include:

• 8:30 ET: Q3 Employment Cost Index (Briefing.com consensus 1.0%; prior 0.9%), weekly Initial Claims (Briefing.com consensus 229,000; prior 227,000), and Continuing Claims (prior 1.897 mln)
• 9:45 ET: October Chicago PMI (Briefing.com consensus 47.5; prior 46.6)
• 10:30 ET: Weekly natural gas inventories (prior +80 bcf)

In other news, the Bank of Japan left its policy rate at 0.25%, which was expected.

In corporate news:

• Microsoft (MSFT 416.01, -16.52, -3.8%): beats by $0.20, beats on revs; Azure +34% CC vs +28-29% CC prior guidance; Guides to DecQ revs slightly below consensus
• Meta Platforms (META 574.23, -17.57, -3.0%): beats by $0.81, reports revs in-line; guides Q4 revs in-line, lowers high end of FY24 total expense guidance range, raises low end of FY24 capex guidance range; AI investments continue to require serious infrastructure
• Starbucks (SBUX 97.70, +0.38, +0.4%): misses by $0.05, misses on revs; guidance remains suspended as previously announced
• Peloton (PTON 7.23, +0.58, +8.7%): beats by $0.15, beats on revs; guides Q2 revs below consensus; guides FY25 revs in-line; announces that Peter Stern, who currently serves as President of Ford Integrated Services and before that held leadership roles at Apple and Time Warner Cable, has been appointed to serve as Peloton’s CEO and President effective January 1, 2025
• Robinhood (HOOD 25.20, -3.01, -10.7%): misses by $0.01, misses on revs
• Estee Lauder (EL 71.79, -15.55, -17.6%): beats by $0.05, reports revs in-line; guides Q2 EPS below consensus; cuts dividend to $0.35/share
• Roku (ROKU 67.18, -10.33, -13.3%): beats by $0.26, beats on revs; guides Q4 revs above consensus

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Thursday on a mostly lower note. Japan's Nikkei: -0.5%, Hong Kong's Hang Seng: -0.3%, China's Shanghai Composite: +0.4%, India's Sensex: -0.7%, South Korea's Kospi: -1.5%, Australia's ASX All Ordinaries: -0.2%.
  • In economic data:
    • China's October Manufacturing PMI 50.1 (expected 49.8; last 49.8) and Non-Manufacturing PMI 50.2 (expected 50.4; last 50.0)
    • Japan's September Industrial Production 1.4% m/m (expected 0.9%; last -3.3%) and September Retail Sales 0.5% yr/yr (expected 2.1%; last 3.1%). September Housing Starts -0.6% yr/yr (expected -4.2%; last -5.1%) and Construction Orders -21.3% yr/yr (last 8.7%)
    • South Korea's September Industrial Production -0.2% m/m (expected 1.2%; last 4.4%); -1.3% yr/yr (expected 0.2%; last 3.8%). September Retail Sales -0.4% m/m (last 1.7%)
    • Hong Kong's Q3 GDP -1.1% qtr/qtr (expected 0.0%; last 0.3%); 1.8% yr/yr (expected 3.1%; last 3.2%)
    • Australia's September Building Approvals 4.4% m/m (expected 2.2%; last -3.9%); 18.1% yr/yr (expected 7.9%; last 24.9%). September Retail Sales 0.1% m/m (expected 0.3%; last 0.7%). September Housing Credit 0.5% (last 0.4%) and Private Sector Credit 0.5% m/m, as expected (last 0.5%). Q3 Import Price Index -1.4% qtr/qtr (expected -0.2%; last 1.0%) and Export Price Index -4.3% qtr/qtr (last -5.9%)
    • New Zealand's October ANZ Business Confidence 65.7 (last 60.9)
  • In news:
    • Japan, South Korea, and Australia reported weak retail sales for September while South Korea's Industrial Production was also on the soft side.
    • China reported slight improvements in Manufacturing (50.1) and non-Manufacturing (50.2) PMIs, though both reading essentially indicate a standstill in activity.
    • New Zealand saw a notable improvement in in Business Confidence in October.
    • The Bank of Japan left its policy rate at 0.25%, which was expected. The central bank maintained its 0.6% growth forecast for FY24/25 and raised the outlook for FY25/26 to 1.1% from 1.0%. Core CPI for both periods is expected to hit 1.9%.
• Major European indices trade in the red. STOXX Europe 600: -0.8%, Germany's DAX: -0.5%, U.K.'s FTSE 100: -0.8%, France's CAC 40: -0.9%, Italy's FTSE MIB: -0.4%, Spain's IBEX 35: -0.2%.
  • In economic data:
    • Eurozone's September Unemployment Rate 6.3% (expected 6.4%; last 6.3%). Flash October CPI 0.3% m/m (last -0.1%); 2.0% yr/yr (expected 1.9%; last 1.7%). Flash Core CPI 0.2% m/m (last 0.1%); 2.7% yr/yr (expected 2.6%; last 2.7%)
    • Germany's September Retail Sales 1.2% m/m (expected -0.7%; last 1.2%); 3.8% yr/yr (expected 1.6%; last 2.5%). September Import Price Index -0.4% m/m, as expected (last -0.4%); -1.3% yr/yr (last 0.2%)
    • France's flash October CPI 0.2% m/m (expected 0.2%; last -1.2%); 1.2% yr/yr (expected 1.1%; last 1.1%). September PPI -0.1% m/m (last 0.3%); -7.0% yr/yr (last -6.3%)
    • Italy's September Unemployment Rate 6.1% (expected 6.2%; last 6.1%). Flash October CPI 0.0% m/m (expected -0.1%; last -0.2%); 0.9% yr/yr (expected 1.0%; last 0.7%)
    • Spain's August Current Account surplus EUR5.63 bln (last EUR5.79 bln)
  • In news:
    • Expectations for sharp rate cuts from the European Central Bank are being reined in after eurozone's flash October CPI reaccelerated to 2.0% yr/yr. The ECB's latest economic bulletin reiterated that any policy changes will be dependent on data.
    • The U.K.'s 10-yr gilt yield is revisiting this year's high in the 4.51% area after yesterday's tax hike announcement.