Here are five things you must know for Friday, October 21:
1. — Stock Futures Slide As Bond Sell-Off Intensifies
US equity futures moved lower Friday, amid one of the longest sell-offs in the Treasury bond market on record, as investors continue about the impact of Federal Federal Reserve rate hikes on a fragile global economy.
Benchmark 10-year Treasury note yields hit a fresh fourteen year high of 4.266% in overnight trading, extending one of the longest weekly stretches of declines since 1984 that has added more than 25 basis points to the paper in just over five trading days.
A better-than-expected reading for weekly jobless claims yesterday, which fell by 12,000 to around 214,000, set against more than 10 million unfilled positions in the world’s biggest economy are cementing the case for a fifth jumbo rate hike from the Fed in December, with the chances of a 75 basis point move next month in Washington a virtual lock, according to the CME Group’s FedWatch.
The move higher in yields, which has taken 2-year notes to 4.618%, is adding more heft to the US dollar index, which rose 0.25% against its global peers in overnight trading to 113.145 as stocks in Asia and Europe traded in the red following last night’s weaker close on Wall Street.
Tech stock declines added to the market’s woes, following a warning on global corporate ad spending from messaging app maker Snap Inc. (SNAP) with social media stocks moving sharply lower in pre-market trading.
Futures contracts tied to the S&P 500 are indicating a 25 point opening bell decline while those linked to the Dow Jones Industrial Average are priced for a 150 point pullback. The tech-focused Nasdaq is priced for a 110 point decline.
Overnight in Asia, the yen fell past the 1.50 mark against the US dollar for a second consecutive session, trading at as low as 150.68, as the Ministry of Finance warned of “severe” treatment to market speculators but stopped short of direct intervention.
In Europe, Britain’s political crisis continued following the Thursday resignation of Prime Minister Liz Truss and the start of yet another leadership contest among Conservative Party members – one that appears to include former Prime Minister Boris Johnson.
The region-wide Stoxx 600 index was marked 1.4% lower in early Frankfurt trading, while Britain’s FTSE 100 fell 0.7% in London. In Asia, the Nikkei 225 closed 0.43% lower in Tokyo while the MSCI ex-Japan benchmark was last seen 0.85% lower, and at a two-and-a-half year low, heading into the final hours of trading.
2. — Snap Plunges After Ad Spending Warning, Grim Outlook
Snap Inc. (SNAP) shares plunged lower in pre-market trading after the messaging app warned investors that its holiday quarter would see little to no revenue growth amid a pullback in global add spending.
Snap said revenue for the three months ending in September were up 6% from last year at $1.13 billion, but marked the slowest rate of growth since the company went public in 2017. Adjusted profits of 8 cents per share beat Street forecasts, but the current quarter outlook sent shares tumbling, and rippled through the social media space, hiving more than $40 billion in market value from rivals such as Twitter (TWTR) Pinterest (PINS) and Meta Platforms (META) .
“We expect that the operating environment will continue to be challenging in the months ahead and believe the actions we are taking provide a clear path forward for Snap,” the group said in its quarterly investor letter.
Snap shares were marked 25.2% lower in pre-market trading to indicate an opening bell price of $8.07 each.
3. — Twitter Slumps On Report Musk Takeover Could Be Subject To US Review
Twitter (TWTR) shares slumped lower in pre-market trading as the impact of Snap’s ad spend warning rippled through social media stocks and Bloomberg reported that Elon Musk’s planned takeover of the group could be subject to a national security review.
Musk, who agreed to pay $44 billion, or $54.20 per share, for the microblogging platform last spring, has made a number of statements recently that appear to suggest a pro-Russia stance amid that country’s invasion of Ukraine.
The report suggested that the US government could use the Committee on Foreign Investment in the United States to review the takeover, given that the group involved in the takeover includes investors from China and Saudi Arabia.
Twitter shares were marked 9.6% lower in pre-market trading to indicate an opening bell price of $47.45 each.
4. — Verizon Edges Higher Ahead of Q3 Earnings After AT&T Beat
Verizon (VZ) shares edged higher in pre-market trading ahead of the wireless communication group’s third quarter earnings prior to the opening bell.
Analysts expect Verizon to post a bottom line of $1.29 per share, down 8.5% from last year, on modestly firmer revenues of $33.78 billion. Wireless subscriber growth, however, is likely to be the main focus of the report following additions of only 12,000 over the three months ending in June – a tally that leads to a reduced full-year profit forecast of between $5.10 and $5.25 per share.
Verizon’s larger rival, AT&T (T) added around 708,000 post-paid wireless subscribers over the third quarter, well ahead of Street forecasts, and lifted its mobility revenue growth guidance to the “upper end” of its prior forecast of between 4.5% and 5%.
Verizon shares were marked 0.4% higher in pre-market trading to indicate an opening bell price of $37.15 each.
5. — American Airlines Lower As Capacity Constraints Offset Solid Outlook
American Airlines (EAL) shares moved lower in pre-market trading despite a better-than-expected third quarter update and a robust near-term outlook from the country’s biggest carrier.
American echoed its rival United Airlines (UAL) in forecasting an ongoing surge in domestic and international travel demand, but noted that labor and aircraft shortages may mean it’s unable to capture all of that market growth until it returns to full capacity later next year.
Still, American sees fourth quarter profits of between 50 and 70 cents per share, more than double the Street consensus forecast, with revenues around 13% north of pre-pandemic levels.
Revenue for the three months ending in September was up 13% from 2019 levels as well, at $13.5 billion, helping American produce a Street-beating bottom line of 69 cents per share.
American Airlines shares were marked 1.34% lower in pre-market trading to indicate an opening bell price of $13.28 each.