Dow futures rise and Nasdaq futures slip as the banks report and Korea's chip stocks crack
Earnings season starts this morning with JPMorgan, Goldman Sachs, Citigroup and Wells Fargo. Treasury yields reopened lower after the holiday, Brent eased from a four-week high, and September CPI lands tomorrow.
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Third-quarter earnings season starts in earnest this morning, and stock futures are pulling in two directions. Blue-chip and defensive names are firm. Technology, and chipmakers in particular, are under pressure after a sharp selloff in South Korea overnight.
As of the early-morning snapshots, Dow Jones Industrial Average futures were up roughly 0.3% to 0.6%. Nasdaq 100 futures were down about 0.4% to 0.6%, and S&P 500 futures were close to flat, between a 0.1% loss and a fractional gain.
Where Monday left things
Monday's session already showed the same split. The Dow rose 195.60 points, or 0.38%, to 51,850.55. The S&P 500 slipped 4.30 points, or 0.06%, to 7,807.24, and the Nasdaq Composite lost 120.27 points, or 0.44%, to 27,245.90.
Two forces did the damage. Oil jumped nearly $2 a barrel after attacks on a Saudi airport, and memory-chip stocks fell on worries about new competition from Chinese manufacturers. Micron dropped about 3.9%.
Those worries traveled overnight. South Korea's KOSPI fell 5.46% to 6,035.35 after briefly breaking below 6,000 during the session, with Samsung Electronics and SK hynix leading the decline. Memory and semiconductor shares extended their losses in US premarket trading.
Bonds are back, and yields are lower
The cash Treasury market, closed on Monday for Columbus Day, reopened with yields moving down. The 10-year yield traded near 5.19% to 5.20% in Asian and European hours, down from about 5.24% at Friday's close and below the 24-year high of 5.365% it reached last week. Softer oil prices helped.
Rate pricing for the Federal Reserve's October 27-28 meeting barely moved. Markets put the chance of a quarter-point hike at around 19% to 20%, according to LSEG data and CME FedWatch. The federal funds target sits at 3.75% to 4.00% after September's increase.
Fed Governor Christopher Waller spoke early this morning at the Bloomberg New Economy Forum. According to Bloomberg News, he said the jump in long-term yields is helping to cool demand in rate-sensitive areas such as housing and autos, doing some of the work tighter policy would otherwise do.
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Oil eases from a four-week high
Brent crude settled at $106.65 a barrel on Monday, its highest close since September 15, after Houthi attacks on Saudi Arabia. Early Tuesday it had eased to roughly $105 to $105.50, with West Texas Intermediate near $92.60 to $93.
Traders were weighing several crosscurrents: Saudi Arabia's pledge to keep exports flowing, the prospect of additional diesel supplies from Russia, and continuing indirect talks between Washington and Tehran. Gold traded in the $4,160 to $4,200 range, helped by the lower yields and a softer dollar.
Today's main event: the banks
JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo are all due to report before the opening bell, with conference calls running from 8:30 a.m. to 11 a.m. ET. UnitedHealth, Johnson & Johnson and Domino's Pizza also report this morning.
The bank reports carry extra weight this quarter. With the 10-year yield above 5%, investors want to know whether higher rates are lifting lending income or starting to squeeze borrowers. Bank stocks lagged during the third quarter: the S&P 500 Banks index fell 5.4% while the broader S&P 500 gained about 2.3%, according to CNBC.
The calendar
- Today: NFIB small business optimism (forecast 98.0, from 98.7 in August), existing home sales at 10 a.m. ET, and remarks from Richmond Fed President Tom Barkin at 1 p.m. and Boston Fed President Susan Collins at 4 p.m.
- Wednesday: September CPI at 8:30 a.m. Forecasts call for headline prices to rise 0.6% on the month and 3.6% from a year earlier, up from 3.4% in August, with core prices up 0.2%. The Fed's Beige Book follows at 2 p.m., and Bank of America and Morgan Stanley report.
- Thursday: September producer prices, retail sales and weekly jobless claims at 8:30 a.m., plus TSMC's results.
- Friday: monthly options expiration, import prices and industrial production.
Wednesday's inflation report is the last major reading before the Fed meets. A headline jump driven by energy is widely expected. The core figure, which strips out food and energy, is the number most likely to move rate expectations either way.
