US stock futures experienced a downward trend Thursday as trade tensions intensified between Washington and Beijing. Notable movements in the market were observed with shares of Tesla, IBM, and American Airlines reacting sharply to their respective earnings reports and guidance. The Dow Jones Industrial Average futures declined by 88 points, or 0.2%, while S&P 500 and Nasdaq 100 futures floated around the flatline, indicating a cautious start for Wall Street.
Tesla’s stock fell by 3% after the company reported mixed results for its third quarter. Revenue increased by 12% to $28.1 billion, but its adjusted earnings per share of $0.50 fell short of the expected $0.55, according to estimates from LSEG. IBM faced a similar fate, with shares plummeting 6% despite surpassing earnings forecasts. Analysts noted that while its earnings exceeded expectations, its software revenue merely matched forecasts rather than surpassing them. Thus far, over 75% of S&P 500 companies reporting earnings have exceeded profit expectations, according to FactSet, yet markets are still highly sensitive to forward guidance and profit margins.
In the previous session, the broader market reflected a downturn, with the S&P 500 slipping by 0.5%, the Dow Jones falling by 334 points (0.7%), and the Nasdaq Composite retreating by 0.9%. This decline indicated a shift in investor interest away from high-valuation technology stocks.
Traders remained focused on policy developments as President Donald Trump confirmed a scheduled meeting with Chinese President Xi Jinping, potentially easing some trade tensions. However, new sanctions were imposed by Washington on Russian oil companies Rosneft and Lukoil, citing continued resistance from Moscow regarding a ceasefire in Ukraine.
Market strategist Chris Grisanti of MAI Capital expressed concerns about current valuation levels, describing them as the “second-highest in a century” and drawing parallels to the dot-com bubble era. He advised that many stocks appear priced based on projections extending into 2030 or 2035, echoing sentiments of irrational exuberance reminiscent of 1999.
Investors are also closely watching an upcoming inflation report due Friday, which could influence the Federal Reserve’s policy decisions at its late October meeting. Analysts anticipate a 0.25% rate cut despite ongoing weakness in jobs data. Fundstrat’s Mark Newton remained bullish, predicting a significant rally for the S&P 500 into the month’s end, bolstered by anticipated breakouts from major tech players like Apple and Google.
As of Thursday, Dow Jones Industrial Average futures were down 0.25%, with the S&P 500 slipping 0.03% and Nasdaq 100 edging lower by 0.01%. The Russell 2000, in contrast, outperformed with a 0.37% gain. In market activity, the SPDR S&P 500 ETF Trust rose slightly to $667.83, while the Invesco QQQ Trust also gained modestly, reaching $605.56 in pre-market trading.
Reports indicated that the Trump administration is considering new export restrictions aimed at China on products developed with U.S. software, and discussions are underway with quantum computing firms regarding federal funding in exchange for ownership stakes, potentially impacting tech regulatory landscapes.
Bond yields remained steady, with the 10-year Treasury yield around 3.98% and the 2-year note trading near 3.46%. The CME FedWatch Tool indicated a projected probability exceeding 96% that the Federal Reserve would cut rates at the next meeting, suggesting a shift towards easing monetary policy amidst moderating economic growth.
In individual stock movements, Tesla shares dropped 3.04% following its quarterly earnings report, which, although showed increased revenue, disappointed on the earnings side. IBM shares sunk 7.14% despite surpassing earnings expectations, as its revenue forecasts failed to impress. Conversely, American Airlines’ stock increased by 1.41% as analysts projected a manageable quarterly loss against its revenue forecasts. Medpace Holdings surged substantially by 18.52% following robust earnings results that exceeded estimates, while Ford traded flat ahead of its earnings announcement.
Key market indicators awaited Thursday include initial jobless claims and existing home sales for September. Federal Reserve officials are also set to testify, providing insights into potential shifts in monetary policy direction amid prevailing economic conditions.
In commodities, fluctuations were noted with crude oil futures rising by 5.22%, driven by supply concerns, while gold prices edged up by 0.38%. The U.S. Dollar Index increased slightly, signaling ongoing demand for safe-haven assets. In the cryptocurrency realm, Bitcoin increased by 1.16%, showcasing continued bullish momentum.
Globally, markets portrayed a mixed picture. Most Asian indices closed higher, driven by gains in emerging markets, while Japan’s Nikkei 225 and South Korea’s Kospi ended in the red amid cautious sentiment surrounding U.S. developments. European markets opened with mixed results, as traders remained attuned to geopolitical events and global bond trends.
Overall, Wednesday’s market activity resulted in declines across major U.S. indexes, primarily influenced by sectors such as industrials, communications, and consumer discretionary stocks.
