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Business Leaders

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HomeAll NewsMost read newsBusiness Leaders Biography
Age : 29
Public asset : 8,939,071,590 USD
Linked companies : Snap Inc. - KKR & Co. Inc.
Biography : Founder of Snap, Inc., Evan Thomas Spiegel currently is Chief Executive Officer & Director at this c

North American Morning Briefing: Stock Futures Waver Ahead of Big Tech Earnings

10/20/2021 | 05:51am EST

MARKET WRAPS

Watch For:

Canada Consumer Price Index for September; EIA Weekly Petroleum Status Report; results from Verizon; Canadian Pacific Railway; IBM; Tesla

Opening Call:

Stock futures wobbled ahead of corporate results that will provide insight into the effects on the technology industry of inflation and supply-chain disruptions, including from the global chip shortage.

Telecommunications giant Verizon is scheduled to post earnings before the opening bell. Tesla and IBM are expected to report after markets close.

Stocks have climbed in recent days as investors parsed strong earnings. Major companies have said that labor shortages, higher raw-materials prices and supply-chain issues haven't eroded profits substantially, reassuring investors.

For tech companies like the ones reporting Wednesday, investors will be watching for an update on disruptions in the semiconductor space and the ability of large firms to increase prices to consumers, according to Kiran Ganesh, a multiasset strategist at UBS Global Wealth Management.

"Markets are taking a bit of a breather after a very strong run. Earnings are very good so far, across a pretty broad range. We're looking out for margins, and comments on input costs, and we haven't really seen too much concern on that," he said. "This is what's really been supporting the rally."

Netflix shares slipped 1.3% in after hours trading. The company said it added more new users than expected in the last quarter, but its co-chief executive also apologized for defending a controversial comedy special by Dave Chappelle.

Investors are awaiting a Federal Reserve report about economic conditions known as the Beige Book, which is expected to be released at 2:30 p.m. ET.

Overseas, the pan-continental Stoxx Europe 600 advanced 0.2%, while in Asia, major benchmarks were mixed.

Forex:

The dollar was little changed in Europe, despite the slightly weaker sentiment in most stock markets.

Healthier risk conditions and the repricing of expectations for central banks' monetary policies worldwide could send the dollar lower in coming days, although any losses might ultimately prove modest, said Westpac.

The European Central Bank is likely to underscore its dovish guidance next week, while the Federal Reserve is expected to announce QE tapering at its Nov. 2-3 meeting, a backdrop that should underpin the dollar, Westpac added.

Commerzbank said the dollar is unlikely to suffer a sustained downward correction in the near term as elevated U.S. inflation forecasts support the market's expectations for interest-rate rises by the Fed.

The foundation for the dollar's strength is "anything but secure" as inflation could fall more rapidly and sharply than the market expects next year, said Commerzbank currency analyst Thu Lan Nguyen.

"But there is still no reason for the market to massively revise its inflation and thus interest rate expectations--at least as long as there are no clear signs that the global supply bottlenecks are starting to ease."

Bonds:

The yield on the benchmark 10-year Treasury note reached 1.673% early Wednesday, its highest level since May, up from 1.634% Tuesday. It then eased back slightly.

"Higher yields mean stock valuations start to look more challenging and it undermines the 'no alternatives' argument for stocks if bonds start to yield something meaningful," said UBS's Ganesh. "We're not near that point yet, but if we incrementally move up, investors will start to grow a little more concerned."

Tim Duy, chief U.S. economist at SGH Macro Advisors, said comments from the Fed are moving in an overall hawkish direction. He said it will be important to see if Jerome Powell pushes back on such talk at his upcoming speech on Friday.

Commodities:

Crude oil futures were down around 1% in Europe after the latest API data showed a bearish reading on U.S. inventories, according to DNB Markets' Helge Andre Martinsen.

While the market had expected a build of 1.3 million barrels in the most recent reporting week, crude stocks actually rose by 3.3 million barrels. Investors will be keeping an eye out to see whether Department of Energy data, released later Wednesday, back up those API figures, Martinsen added.

Base metals prices were lower after China said it was looking to intervene in energy markets.

China's National Development and Reform Commission suggested it was looking at ways to bring down soaring coal prices, a move that could ease pressure on metals makers and has already prompted a sharp drop in Chinese coal futures.

Rising energy prices have been driving production curtailments at smelters and pushing base metals prices higher.

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10-20-21 0550ET