Most recently, Netflix and United Airlines posted much better results than expected. Netflix surprised with a positive forecast of 4.5 million new subscriptions by the end of 2022 from the ad-supported version of the service, versus 4.2 million expected. Netflix added 2.4 million new subscriptions between July and September. However, it expects fourth-quarter revenue to fall to $7.8 billion due to the strong U.S. dollar.

United Airlines results also positively surprised investors, with revenue reaching $12.88 billion versus $12.75 billion expected. The airline said it expects fourth-quarter earnings per share of $2.25, versus $0.85 forecast by analysts. This comes after Delta Air Lines' strong guidance last week, which strengthens prospects for the airline sector as travelers return after the pandemic, despite inflationary pressures.

These strong figures were supposed to extend the strong bullish trend today, but Wall Street opened in the red - although it recovered later - and Treasury yields jumped to 14-year highs. This was caused by new figures showing that new residential construction in the U.S. dropped in September, offsetting gains see in August, as potential buyers feel the pinch of rising interest rates. Housing starts declined by 8.1% in September compared with the previous month, to 1.439 million. This compares with a 6.7% drop expected in a WSJ consensus of analysts.

Meanwhile, data also published today showed UK Annual inflation passed the 10% mark again to 10.1% in September, after a slight decline in August to 9.9%. The rise was fueled by food prices, which have experienced their strongest surge in forty years. However, this was partially offset by a decline in fuel prices and airfares.

This is fueling concerns about how many aggressive rate hikes the Bank of England will have to implement in the coming months. Markets are now split between a 75 and 100 basis point increase at the next meeting on November 3, but most investors believe that the Bank Rate will reach 4% by the end of the year.

There are investors who believe that these forecasts are too optimistic and that more will be done by central banks to tame inflation. Conversely, some investors believe that countries are too heavily indebted and that central banks will have to stop raising rates if they want to avoid a complete economic meltdown. We'll know soon which camp is right…

Later today, the latest edition of the Fed's Beige Book will be published, which includes the economic expectations of the regional banks that make up the central bank.

 

Economic highlights of the day:

In Europe, British inflation and Eurozone inflation and in the US, September building permits / housing starts. All the macro agenda is here.

The dollar is trading at EUR 1.0221 and GBP 0.8888. The ounce of gold is little changed at USD 1634. Oil is chipping away, with North Sea Brent at USD 91.40 a barrel and US WTI light crude at USD 84.30. The yield on 10-year U.S. debt rises back to 4.02%. Bitcoin remains near USD 19,300 per unit.

 

In corporate news:

* Netflix was up 12.7% in premarket trading as the video streaming platform added more subscribers than expected in the third quarter, while being slightly more optimistic than analysts for the end of the year. Its competitors WALT DISNEY, WARNER BROS DISCOVERY, PARAMOUNT GLOBAL and ROKU were up 0.4% to 3.12% in pre-market trading.

* Procter & Gamble - The consumer products maker lowered its annual sales forecast due to the stronger dollar, but its stock was still up 2% in premarket trading as investors focused on the company's better-than-expected quarterly sales and profit from price increases.

* Baker Hughes reported a quarterly loss, after a profit a year ago, due to restructuring and impairment charges related to its latest reorganization.

* Travelers Companies reported a 20% drop in quarterly profit on Wednesday, hurt in part by hurricane-related claims.

* Nasdaq reported a 15% increase in adjusted third-quarter profit on strong demand for its investment products, which helped offset a slowdown in the number of IPOs.

* Omnicom was up 2.6 percent in after-hours trading on Tuesday, as adjusted earnings and third-quarter sales beat analysts' expectations.

* Adobe gained 2.3 percent in after-hours trading as the Photoshop maker reaffirmed its financial targets for this year and said it expects 2023 revenue to exceed $19 billion.

* United Airlines Holdings jumped 8 percent in after-hours trading after the airline reported its largest quarterly profit in three years, with adjusted third-quarter earnings per share of $2.81, compared with the $2.28 Refinitiv consensus forecast.

* Amazon on Wednesday announced the launch of a U.K. platform offering home insurance services where third-party companies such as Ageas, Co-op and LV will offer their services.

* Tesla and IBM are scheduled to report third-quarter results after the close of Wall Street.

 

Analyst recommendations:

  • AstraZeneca: Berenberg remains Buy with a price target reduced from GBp 12,000 to GBp 11,800.
  • Blackrock: Credit Suisse initiated coverage with a recommendation of neutral. PT down 7.1% to $540.
  • Global Payments: Morgan Stanley lowers price target to $128 from $141, maintains equal-weight rating.
  • Intel: DA Davidson cuts price target to $32 from $41, neutral rating kept.
  • Lockheed Martin: Baird upgrades to outperform from neutral. PT up 19% to $513.
  • Marston's: HSBC upgrades from sell to hold targeting GBp 40.
  • Netflix: KGI Securities raised its recommendation to outperform from neutral. PT up 37% to $330.
  • PepsiCo: Bernstein raises price target to $172 from $166, maintains underperform rating.
  • Polaris: Citi analyst James Hardiman downgrades to neutral from buy. PT up 2.2% to $101.
  • Roku: Morgan Stanley lowers price target to $50 from $55, maintains underweight rating.
  • Schwab: Credit Suisse initiated coverage with a recommendation of outperform. PT up 17% to $80.
  • Signature Bank: Keefe, Bruyette & Woods downgrades to market perform from outperform. PT rises 18% to $185.
  • State Street Corp: DA Davidson lowers price target to $87 from $96, maintains buy rating.
  • The Goldman Sachs Group: Keefe Bruyette & Woods raises price target to $438 from $429, maintains outperform rating.
  • Truist Financial: Evercore ISI downgrades to inline from outperform. PT up 8.4% to $47.