MARKET WRAPS
Watch For:
Weekly Jobless Claims; EIA Weekly Petroleum Report; World Agricultural Supply & Demand Estimates; Earnings from Delta, Walgreens, Domino's Pizza
Today's Top Headlines/Must Reads:
- What to Watch in the CPI Report
- Are High Rates Taking a Toll on Consumers? Bank Earnings Will Provide a Clue
- Israel Conflict Poses Increased Risk to Oil Markets, IEA Warns
Follow WSJ market coverage here
Opening Call:
Stock futures rose early on Thursday, as Treasury yields held near two-week lows ahead of the September CPI inflation report.
Investors hope the inflation data will confirm price pressures continue to ease and so support the narrative that the Federal Reserve has finished raising interest rates in this cycle.
"The probability of a no rate hike in November jumped above 90% after the Fed minutes, whereas this probability stood at around the 70% level at the beginning of this week," Swissquote Bank said.
"Fed funds futures price in more than 70% for a no hike in December as well, whereas this probability closer to 50/50 a few days ago."
Aggregate S&P 500 earnings are forecast to have risen 1.3% from a year ago, according to Refinitiv, which also noted that the market has grown more optimistic about corporate profits of late.
"For the first time in six quarters, earnings growth expectations have risen heading into the quarter [Q3: +0.3 percentage points]. The prior six quarters saw an average decline of 4.2 percentage points heading into earnings season," Refinitiv said.
"This sets up another opportunity for Q3 to deliver a better-than-expected quarter if history repeats itself following a very strong earnings surprise rate in Q1 and Q2, which were the highest since 2021."
Overseas, stock indexes in Europe, Japan and China all gained.
Premarket Movers
Birkenstock was rising 0.2% in premarket trading following its disappointing trading debut.
Ford was down 1.6% after the United Auto Workers union went on strike at a pickup-truck plant in Kentucky on Wednesday evening, escalating its nearly four-week labor action by hitting the automaker's largest factory.
Microsoft fell 0.4% after it said it has received a notice from the Internal Revenue Service that it owes $28.9 billion in back taxes, plus interest and fines, covering the period from 2004 to 2013.
Netflix, Disney and Warner Bros. Discovery were up slightly. Negotiations between Hollywood studios, streamers and striking actors stalled Wednesday, dampening hopes that the industry could soon return to work.
Wednesday's Post-Close Movers
Bsquare said it would be acquired by private company Kontron America. The offer of $1.90 in cash per share of Bsquare represents a 62% premium on the trailing 52-week volume weighted average of Bsquare's closing price Tuesday. Shares rose 45%.
Genetron Holdings said it would go private after a group led by Chief Executive Sizhen Wang initiated a tender offer for the company's shares. The bid values the company at $126 million. Shares rose 9.6%.
Victoria's Secret narrowed its third-quarter guidance range for net loss as its sales improved. The retailer said sales growth internationally was better than expected and trends in the North American market had improved month-on-month. Shares rose 1.9%.
Forex:
The dollar eased back ahead of the CPI data.
"The retreat in Treasuries [yields] and the dollar is not purely driven by, yes, a swift move to safe haven assets," Swissquote Bank said. "It is also driven by the Fed expectations."
Sterling was little changed after the latest U.K. GDP data was in line with the consensus forecast by economists in a WSJ survey.
"Thursday's reading is unlikely to encourage a change of stance from the Bank of England, with policymakers having recently paused their hiking cycle signalling a high-for-longer stance," Monex Europe said.
Read UK Economy Expanded in August, Driven by Services-Sector Rebound
Bonds:
Bergos said government and corporate bonds with good credit ratings are currently the conservative cornerstones of a multi-asset solution, with the one- to five-year segment giving a very attractive offer.
It said emerging market bonds are a good addition to the mix, while high-yield bonds should be treated with caution.
"Their additional risk is currently not particularly well remunerated and default rates are likely to rise."
Energy:
Oil prices ticked higher in Europe as the dollar eased back ahead of CPI data.
Yet, concerns over a broader conflict slightly ease after U.S. intelligence indicated Iranian officials were surprised by Hamas's attack, according to analysts.
"The risk premium continues to erode with the conflict largely contained to Israel and Hamas," ING said.
Metals:
Base metals and gold prices were higher in early London trading, as a weakening dollar provided support to markets.
Gold prices were being helped by lowering bond yields following the release of Fed Minutes on Wednesday, alongside safe-haven buying, ANZ said.
However, ING noted that copper inventories were rising. "LME on-warrant copper stockpiles rose by 8,150 metric tons yesterday to 177,125 tons, the highest since Aug. 25, 2021."
Read Gold Shines as Metal Prices Await Direction From China
TODAY'S TOP HEADLINES
Facing Exclusion From U.S., Chinese EV Suppliers Map a Circuitous Route Back In
SINGAPORE-Chinese battery companies critical to electric vehicles are pursuing deals with U.S. free-trade partners South Korea and Morocco, seeking to tap growing demand in America and bypass rules aimed at shutting them out of the market.
Chinese businesses that supply raw materials to make EV batteries have announced at least nine joint ventures and investments worth more than $4.5 billion in South Korea this year, according to a Wall Street Journal review of stock exchange filings.
Hollywood Studios Suspend Talks With Actors
Negotiations between Hollywood studios, streamers and striking actors stalled Wednesday after less than two weeks, dampening hopes that the industry could soon return to work.
The coalition representing entertainment-industry companies including Netflix, Disney, Warner Bros. Discovery, Comcast's NBCUniversal, Amazon and others said a new proposal from the Screen Actors Guild submitted Wednesday "would create an untenable economic burden." The gap between the two sides is too wide, the Alliance of Motion Picture and Television Producers said.
UAW Strikes at Ford Pickup-Truck Plant in Kentucky
The United Auto Workers union went on strike at a Ford Motor pickup-truck plant in Kentucky Wednesday evening, escalating its nearly four-week labor action by hitting the automaker's largest factory.
The plant's 8,700 workers walked off the job at 6:30 p.m., marking the largest strike action taken by the UAW at any of the three Detroit automakers since the union declared a strike against Ford, General Motors and Chrysler-parent Stellantis in mid-September.
Albemarle's Liontown Deal the Latest Threatened by Assertive Shareholders
SYDNEY-Albemarle's proposed $4.24 billion takeover of Australian lithium miner Liontown Resources is the latest in a flurry of multibillion-dollar deals to hit a hurdle in the form of assertive shareholders.
The U.S. miner spent almost a month scrutinizing Liontown's books after making what it said was its final proposal, but has now asked for another week after a company controlled by Gina Rinehart, Australia's richest woman, snapped up what appears to be a blocking stake.
The Federal Deficit Is Even Bigger Than It Looks
When it comes to the size of the federal government's annual deficit, appearances can be deceiving.
The gap between spending and revenue for fiscal year 2023, which ended on Sept. 30, was $1.7 trillion, the Congressional Budget Office projected ahead of the official Treasury Department figures. That would be a roughly $300 billion widening in the shortfall from fiscal year 2022.
Ukraine's Next Target: Russian Supply Lines
Alongside Ukraine's assault on Russian front lines, the country is conducting a second-and potentially more critical-campaign: destroying enemy command centers, ammunition depots and logistics lines that Moscow relies on to keep fighting.
Even as Kyiv's soldiers fight to crack open Russian defenses in the country's south and east, they are using Western-supplied munitions to target Russian supplies that sit beyond the front lines. In doing so, Ukraine hopes to boost its chance of weakening Russian forces enough to slice through occupation forces.
Iran Knew Hamas Was Planning Attacks, but Not Timing or Scale, U.S. Says
WASHINGTON-Tehran likely knew Hamas was planning operations against Israel but didn't know the precise timing or scope of the surprise attack the group mounted last week, according to a preliminary unclassified assessment by U.S. intelligence agencies.
The judgment by the American intelligence community represents an initial effort to determine what role Iran might have played in an attack that has sent shock waves through the region.
Hamas Invasion Rewrites Rules in Middle East
DUBAI-Saturday's attack on Israel by Hamas militants, who killed more than 1,200 people and kidnapped many others back to the Gaza Strip, has upended fundamental assumptions about the Middle East.
Now, as Israel, its enemies and its main partner, the U.S., respond to these shocking events, the new-and untested-rules of the game risk turning the bloody confrontation between Israel and Hamas into a much wider war.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
None scheduled
Economic Calendar:
Nothing scheduled
Expected Major Events for Thursday
06:00/UK: Aug Index of production
06:00/UK: Aug UK trade
06:00/UK: Aug Index of services
06:00/UK: Aug Monthly GDP estimates
08:00/FRA: Oct IEA Oil Market Report
08:30/UK: 3Q Bank of England Credit Conditions Survey
08:30/UK: 3Q Bank of England's Bank Liabilities Survey
(MORE TO FOLLOW) Dow Jones Newswires
10-12-23 0618ET
