MARKET WRAPS
Watch For:
Retail Sales for September; Industrial Production and Capacity Utilization for September; Canada Housing Starts for September; Canada Consumer Price Index for September; Earnings from Bank of America, Goldman Sachs, Johnson & Johnson, Lockheed Martin
Today's Top Headlines/Must Reads:
- How Long Can the American Consumer Keep Splurging?
- Bond Yields Are Rising Quickly. Why the Fed Is Getting Worried
- EVs Are on a Lithium Roller Coaster
Opening Call:
Stock futures slipped and Treasury yields were higher on Tuesday, as investors weighed Wall Street earnings and the ongoing Israel-Hamas conflict.
Investors are watching bank earnings closely for clues on how the surge in borrowing costs is impacting American households and businesses.
Meanwhile, news that President Biden will visit Israel and neighboring countries in coming days has helped calm nerves that the Israel-Hamas conflict will cause a greater conflagration in the region.
"The recent risk-off sentiment that had cast a shadow over the markets seems to be easing, partly due to extensive shuttle diplomacy by the White House and other regional actors," SPI asset Management said.
"Nevertheless, this optimism comes before Israel launches its ground offensive in Gaza, and this development could swiftly sour sentiment once more."
Premarket Movers
U.S.-listed shares of Ericsson fell 6.1% after the maker of telecommunications equipment withdrew margin guidance for 2024 , saying it expects current macroeconomic uncertainty to "prevail" into next year.
Fortrea rose more than 3% after WSJ reported that activist investor Starboard Value had built a stake of more than 5% in the company.
NetScout Systems was falling 19% after the company said it was reducing guidance for fiscal 2024 "to reflect a recent slowing in order conversion."
Monday's Post-Close Movers
Elys Game Technology announced that Nasdaq will suspend its shares and look to delist the stock after it did not maintain the $1 minimum closing bid price. The company said it had not decided whether to appeal the decision. Shares fell 62%.
ServisFirst Bancshares reported that net interest income in the third quarter fell more than expected by analysts. The regional bank's profit shrunk but topped forecasts on a per-share basis. Shares fell 11%.
Forex:
The dollar traded firmer in Europe, although there is a risk it could start to weaken "due to fewer positive economic surprises from the U.S. in the near-term," Danske Bank Research said.
"While we maintain our strategic case for a lower EUR/USD, we still see potential for USD weakness."
The retail sales data could turn out to be the most significant data release this week, Danske Bank added.
Sterling fell after U.K. labor market data showed wage growth edged lower , albeit from high levels, enough to further dent prospects of the Bank of England raising rates any further, ING said.
Focus now turns to Wednesday's CPI inflation data where a softer reading could see EUR/GBP rise to 0.8700, it added.
Energy:
Brent crude prices held steady in early European trading, with markets nervously watching events unfold in the Middle East.
"Markets seem to be taking the geopolitical risk session by session at the moment, rather than having any strategic sense of where things are heading," Deutsche Bank said.
"It feels like we're in a very dangerous and delicate holding pattern for now, but with no major developments since the Israeli evacuation notice to Gaza residents on Friday, markets have taken off their weekend hedges over the last 24 hours or so."
Metals:
Gold prices could move to an all-time high in 2024, supported by the possibility of a weaker dollar combined with rate cuts from the Fed, the World Gold Council said.
It added that gold prices are currently high and any rise would be coming from a high base helping to support the precious metal.
Chinese stimulus hopes are giving iron-ore prices another boost , Commonwealth Bank of Australia said, after a 1.7% rise in the spot price on Monday to $120.15/metric ton.
CBA said a liquidity injection by China's central bank has fueled expectations that China will boost infrastructure spending this year. Iron ore is the main ingredient needed for steelmaking.
TODAY'S TOP HEADLINES
Baidu Says Its AI Model Now Rivals OpenAI's
China's Baidu unveiled a new generative artificial intelligence model that it said rivals OpenAI's ChatGPT, as part of its efforts to lead the race for AI development in the world's second-largest economy.
Baidu, the owner of China's largest internet search engine, on Tuesday introduced the latest version of its model known as Ernie, saying that it reflects improvements in understanding, generation, logic and memory.
Ford Executive Chairman Calls for End to UAW Strike
Ford Motor Executive Chair Bill Ford called for a resolution to an "acrimonious" round of talks with the United Auto Workers and warned that a continuing strike could hurt the company's ability to keep factory jobs in the U.S.
In his first public remarks on the negotiations since they began this summer, the great-grandson of company founder Henry Ford said the strike and escalating contract battle with the union are threatening the industry's future.
China Property Bonds Looked Cheap at 20 Cents on the Dollar. They Weren't.
China's property market meltdown created a multibillion-dollar opportunity for distressed-debt investors. It hasn't paid off.
The country's real-estate sector is reeling from a yearslong slowdown that has put strains on the economy, sparked widespread protests and triggered defaults on around $81 billion of Chinese developers' international bonds between 2021 and 2022, according to figures from S&P Global Ratings.
It's Getting Too Expensive to Have Fun
The rising cost of fun is becoming a drag.
Ticket prices for live entertainment events, from Taylor Swift concerts to National Football League games and high-season Disney theme-park visits, rose at a startling rate this year, triggering a phenomenon that analysts have dubbed "funflation."
Israel Attacks 200 Targets in Gaza Ahead of Biden Visit
The Israeli military said Tuesday that it attacked 200 targets in Gaza overnight, as aid workers warned of a looming humanitarian collapse in the strip and U.S. diplomats prepared for President Biden to visit Israel.
The Biden administration is seeking to achieve a complicated set of goals after Hamas, the U.S.-designated terrorist group that controls Gaza, struck Israel more than a week ago in one of the most devastating attacks in the country's history.
Biden to Visit Israel as U.S. Push for Border Opening Stalls
President Biden will visit Israel on Wednesday to reinforce his support for America's closest ally in the Middle East, as Israel's leadership gears up for a ground offensive in the Gaza Strip that has raised the risks of a regional war against Iran-backed militant groups.
A presidential trip ahead of Israel's looming ground offensive into the Gaza Strip comes with an array of political and security challenges. It also comes amid mounting concerns over a broader Middle East conflict and a worsening humanitarian crisis in Gaza, which has been under siege by the Israeli government following an Oct. 7 terrorist attack by Hamas on southern Israel.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Nothing scheduled
Economic Calendar (ET):
0815 Sep Housing Starts
0830 Sep CPI
0830 Aug New motor vehicle sales
0830 Aug International transactions in securities
Stocks to Watch:
Hydro One Prices C$400M Sustainable Medium-Term Notes Offering; Notes to Bear 5.54% Coupon, Mature in 2025; to Use Amount Equal to Net Proceeds of Notes Sale to Finance/Refinance Green Projects; Proceeds May Initially Be Used for Dept Payments, Investments in Bank Deposits; Offering to Close Oct 20
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Imperial Metals: Reports Production Update for 3Q; Production for 3Q Was 12,182,493 Pounds Copper and 14,335 Ounces Gold; 8,056,570 Pounds Copper and 11,321 Ounces Gold Were Produced at Mount Polley and 4,125,923 Pounds Copper and 3,014 Ounces Gold From Imperial's 30% Shr of Red Chris Mine Production
Expected Major Events for Tuesday
04:30/JPN: Aug Tertiary Industry Index
06:00/UK: Oct 'Average weekly earnings in Great Britain' and 'Vacancies and jobs in the UK' data release
08:30/UK: Jul Card Spending statistics
09:00/GER: Oct ZEW Indicator of Economic Sentiment
12:15/CAN: Sep Housing Starts
12:30/US: Sep Advance Monthly Sales for Retail & Food Services
12:30/CAN: Aug New motor vehicle sales
12:30/CAN: Aug International transactions in securities
12:30/CAN: Sep CPI
12:55/US: 10/14 Johnson Redbook Retail Sales Index
13:15/US: Sep Industrial Production & Capacity Utilization
14:00/US: Aug Manufacturing & Trade: Inventories & Sales
14:00/US: Oct NAHB Housing Market Index
18:00/US: Sep Monthly Treasury Statement of Receipts and Outlays of the U.S. Government
20:00/US: Aug Treasury International Capital Data
20:30/US: 10/13 API Weekly Statistical Bulletin
23:01/UK: Sep Scottish Retail Sales Monitor
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Tuesday
Absolute Software (ABST.T) is expected to report $0.05 for 4Q.
Albertsons Companies Inc (ACI) is expected to report $0.48 for 2Q.
AmeriServ Financial Inc (ASRV) is expected to report for 3Q.
Bank First Corp (BFC) is expected to report $1.45 for 3Q.
Bank of America Corp (BAC) is expected to report $0.83 for 3Q.
Bank of New York Mellon Corp (BK) is expected to report $1.15 for 3Q.
Bar Harbor Bankshares (BHB) is expected to report $0.67 for 3Q.
CCA Industries (CAWW) is expected to report for 3Q.
Cambridge Bancorp (CATC) is expected to report $1.07 for 3Q.
Equity Bancshares Inc (EQBK) is expected to report $0.73 for 3Q.
(MORE TO FOLLOW) Dow Jones Newswires
10-17-23 0606ET
