Pre-market Market Trends
1. On October 8th (Tuesday) pre-market, U.S. stock futures across the board rose. As of press time, Dow futures were up 0.14%, S&P 500 index futures were up 0.42%, and Nasdaq futures were up 0.47%.
2. The German DAX index fell 0.06%, the UK's FTSE 100 index fell 1.05%, the French CAC 40 index fell 0.54%, and the Euro Stoxx 50 index fell 0.40%.
3. WTI crude oil fell 2.29%, trading at $75.37 per barrel. Brent crude oil fell 2.15%, trading at $79.19 per barrel.
Market News
Two Federal Reserve officials speak in unison: supportive of further rate cuts. Federal Reserve Governor Kugler stated on Tuesday that she strongly supports the Fed's recent rate cuts and would support further rate cuts if inflation continues to slow as she expects. Kugler said: "The labor market remains resilient, but I support a balanced approach to the FOMC's dual mandate so that we can continue to make progress on inflation while avoiding an unwelcome slowdown in job growth and economic expansion." Meanwhile, New York Fed President John Williams, who has a permanent vote on the FOMC, stated on Tuesday that it would be appropriate for the Fed to cut rates "over time" after the 50 basis point cut in September. He said: "Currently, I believe monetary policy is well positioned for the outlook. If you look at the Summary of Economic Projections, you will find that it is a very good base case, with the economy continuing to grow and inflation returning to 2%."
Morgan Stanley: U.S. September core CPI expected to rise moderately, overall inflation decline may affect future rate decisions. U.S. September CPI data will be released at 20:30 Beijing time on Thursday. Morgan Stanley predicts that U.S. September core CPI will rise by 0.26% month-on-month, slightly above the market's普遍预期 of 0.20%. The bank also forecasts that September core CPI will rise by 3.2% year-on-year, in line with the market's普遍预期. Morgan Stanley also said that it expects September overall CPI to rise by 0.09% month-on-month, with the decline in overall inflation due to falling gasoline prices. The bank believes that there are subtleties in the outlook for the U.S. September CPI report, with core CPI expected to rise moderately, while the trend in goods and services inflation is mixed. The bank believes that the expected decline in overall inflation driven by falling gasoline prices may affect the market's view of the direction of the Fed's monetary policy. The bank added that this CPI report will play a key role in assessing inflation trends and potential impacts on future rate decisions.
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Third-quarter earnings season approaches, can the stock market "engine" accelerate further? The third-quarter earnings reports of S&P 500 companies began to be released this week. According to FactSet data, analysts expect earnings per share of S&P 500 companies to grow by 4.1% year-on-year, to just over $60—this is realistic based on a 4.7% increase in sales (considering that economic growth and inflation have slowed to single-digit growth). Product costs have not risen significantly, but other expenses such as employee salaries continue to increase, suppressing the improvement of corporate profit margins. The technology sector has the fastest profit growth rate, but the "cyclical" industries sensitive to the economy are dragging growth. Evercore expects earnings of financial, non-essential consumer goods, and industrial companies to decline slightly year-on-year; similarly, the performance of materials and energy sectors is also poor, especially energy, due to lower oil prices compared to last year's third quarter. However, although earnings growth of S&P 500 companies is expected to slightly exceed expectations, it will not lead to a significant increase in stock prices.
Billions of hot money pour into U.S.-listed Chinese ETFs, asset management companies expect optimism to continue. In the past week, while China's mainland financial markets were closed for the National Day holiday, investors injected $5.2 billion (about 36 billion yuan) of new assets into U.S. exchange-traded funds (ETFs) targeting the Chinese market. Data from TrackInsight, a Paris-based data analytics company, shows that more than 20 China-focused ETFs achieved double-digit returns within a week, with gains ranging from 10% to 28%, outperforming more than 3,000 ETFs traded in the U.S. market last week. Dave Mazza, CEO of Roundhill Investments, pointed out that he saw a shift in investor sentiment. Mazza said: "We believe that at some point in the near future, the tide will turn, and China will once again become an investable proposition."
The biggest risk in the oil market is imminent! Could oil prices rise to $350 in the worst-case scenario? The escalating conflict in the Middle East has once again put the world's most important oil artery in the spotlight. The Strait of Hormuz is widely regarded as a vital oil transportation chokepoint. The waterway, located between Iran and Oman, is a narrow but strategically significant strait connecting the crude oil-producing countries of the Middle East with major markets around the world. According to the U.S. Energy Information Administration (EIA), the average oil flow through the Strait of Hormuz in 2022 was 21 million barrels per day, accounting for about 21% of global crude oil trade. For many energy analysts, a blockade or severe disruption of traffic in the Strait of Hormuz is the worst-case scenario—this would cause oil prices to soar above $100 per barrel. Bjarne Schieldrop, Chief Commodity Analyst at Swedish bank SEB, even said that if the worst-case scenario occurs and the Strait of Hormuz is blocked for a month or longer, Brent crude oil could surge to $350 per barrel.Individual Stock News
PepsiCo (PEP.US) reported mixed Q3 results and lowered its full-year revenue guidance. The financial report showed that PepsiCo's Q3 revenue decreased by 0.6% year-on-year to $23.32 billion, below the market expectation of $23.86 billion; core earnings per share were $2.31, slightly above the market expectation of $2.29. The company attributed the lower-than-expected revenue to sluggish consumer demand in North America, recall events, and geopolitical tensions that disrupted some international markets. Additionally, the company currently expects full-year organic revenue to grow by a low single-digit percentage, previously expected to grow by 4%; the company still forecasts full-year core earnings per share to be at least $8.15, which is roughly in line with market expectations.
Buffett continues to sell Bank of America (BAC.US) shares, accumulating over $10 billion in cash. According to a document filed with regulators on Monday, Berkshire Hathaway (BRK.A.US) has gained over $10 billion in total proceeds from reducing its stake in the second-largest U.S. bank through the 14th round of sales. The 94-year-old Buffett began cutting this substantial investment in mid-July and has since been putting pressure on the company's stock price. In the most recent round of transactions, Berkshire Hathaway cashed out $383 million in three trading days, selling fewer shares than in the previous rounds. The company's filing shows that Buffett's selling tends to slow down when the stock price drops to $39.
Stellantis (STLA.US) countersues UAW: Strike threats violate contract terms. Last Thursday, Stellantis filed a federal lawsuit against the United Auto Workers (UAW), claiming that the union's threat to strike over Stellantis' delayed investment plans violated the contract terms agreed upon last fall. Stellantis is attempting to hold the UAW and local union chapters accountable for any potential revenue losses and other damages caused by any strike. Stellantis stated that the new lawsuit prompted them to hold a meeting with the UAW on Saturday, which proposed to re-establish a concept called the "jobs bank," which typically prohibits layoffs by the three Detroit automakers. Stellantis rejected this proposal, calling it "a factor leading to the automakers' bankruptcy in 2009" and "jeopardizing the company's future." UAW President Shawn Fain said on Monday that "serious mismanagement at the top of Stellantis is killing the company" and refuted the claim that the "jobs bank" led to bankruptcy.
Vodafone (VOD.US) and Google (GOOGL.US) "renew" ten-year cooperation to promote artificial intelligence phones and services. Global communications giant Vodafone and Google announced today a ten-year strategic expansion of their existing partnership, bringing new services, devices, and TV experiences to Vodafone's millions of customers in Europe and Africa, supported by Google Cloud and Google Gemini AI chatbots. Vodafone will promote Google's cloud storage subscription services, including Google One AI Premium services that can access the Gemini chatbot. Vodafone stated that it will expand Google's artificial intelligence Pixel device access in Europe through its 5G network and continue to promote the Android ecosystem. The UK-based operator will also demonstrate to customers how to use the artificial intelligence features of the latest Pixel devices in stores.
Honeywell (HON.US) rises more than 3% before the market, plans to spin off advanced materials business. Honeywell announced that it will spin off its advanced materials business and make it an independently listed company in the United States. The products produced by this business are used in various fields from bulletproof armor to pharmaceutical packaging. The company's CEO, Vimal Kapur, has been streamlining the company's business portfolio over the past few years and focusing on aviation, automation, and energy sectors. Last year, the advanced materials business accounted for 10% of Honeywell's total sales of $36.66 billion. Honeywell expects the business to generate sales of $3.7 billion to $3.9 billion in the fiscal year of 2024. Honeywell stated that the planned spin-off is expected to be completed by the end of next year or early 2026 and will not affect the company's overall outlook.
DocuSign (DOCU.US) rises more than 5% before the market, included in the S&P MidCap 400 Index. In terms of news, DocuSign will be included in the S&P MidCap 400 Index, replacing MDU Resources (MDU.US), and the change will take effect before the market opens on October 11th.
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