Mixed Reaction To Earnings News May Lead To Choppy Trading On Wall Street

The major U.S. index futures are currently pointing to a roughly flat open on Wednesday, with stocks likely to show a lack of direction after trending higher in recent sessions.

Uncertainty about the near-term outlook for the markets may keep some traders on the sidelines following the recent upward trend, which has lifted the Dow and the S&P 500 to new record highs.

With the Federal Reserve’s monetary policy meeting looming next week, traders may be reluctant to continue buying stocks, as the central bank could announce plans to begin scaling back its asset purchases.

A mixed reaction to the latest batch of earnings news may also lead to choppy trading on Wall Street, as traders digest results from a slew of big-name companies.

Shares of Coca-Cola (KO) are moving notably higher in pre-market trading after the beverage giant reported better than expected third quarter results and raised its full-year guidance.

Fast food giant McDonald’s (MCD) is also likely to see initial strength after reporting third quarter results that exceeded analyst estimates on both the top and bottom lines.

Shares of Microsoft (MSFT) and Twitter (TWTR) are also moving higher in pre-market trading after reporting better than expected quarterly earnings.

On the other hand, shares of Texas Instruments (TXN) are seeing significant pre-market weakness after the chipmaker reported third quarter revenues that missed analyst estimates.

Auto giant General Motors (GM) may also move to the downside after reporting third quarter earnings and revenues that fell year-over-year.

Meanwhile, shares of Google parent Alphabet (GOOGL) are nearly flat in pre-market trading after the company reported better than expected third quarter results.

Stocks pulled back well off their best levels of the day but still managed to end Tuesday’s session modestly higher. With the uptick on the day, the Dow and the S&P 500 once again reached new record closing highs.

After rising by more than 150 points to a new record intraday high, the Dow ended the day up just 15.73 points or less than a tenth of a percent at 35,756.88. The Nasdaq also crept up 9.01 points or 0.1 percent to 15,235.72, while the S&P 500 edged up 8.31 points or 0.2 percent to 4,574.79.

The early strength on Wall Street reflected a largely positive reaction to the latest batch of earnings news from several big-name companies.

Shares of UPS (UPS) moved sharply higher after the delivery giant reported third quarter results that exceeded analyst estimates on both the top and bottom lines.

General Electric (GE) also moved to the upside after reporting better than expected third quarter earnings and raising its full-year guidance.

On the other hand, shares of Facebook (FB) moved lower after the social media giant reported third quarter earnings that beat expectations but its revenues came in below estimates.

Positive sentiment may also have been generated in reaction to a report from the Commerce Department showing new home sales in the U.S. skyrocketed in the month of September.

The report said new home sales soared by 14.0 percent to an annual rate of 800,000 in September after falling by 1.4 percent to a downwardly revised rate of 702,000 in August.

Economists had expected new home sales to jump by 2.7 percent to an annual rate of 760,000 from the 740,000 originally reported for the previous month.

A separate report from the Conference Board showed consumer confidence reversed a three-month downward trend in October amid easing concerns about the Delta variant of the coronavirus.

The Conference Board said its consumer confidence index climbed to 113.8 in October from an upwardly revised 109.8 in September.

The rebound surprised economists, who had expected the consumer confidence index to edge down to 109.0 from the 109.3 originally reported for the previous month.

Reflecting the lackluster close by the broader markets, most of the major sectors ended the session showing only modest moves.

Tobacco stocks showed a substantial move to the downside, however, with the NYSE Arca Tobacco Index plunging by 4 percent.

Turning Point Brands (TPB) led the sector lower after reporting mixed third quarter results and lowered its full-year revenue guidance.

Computer hardware stocks also showed a notable move to the downside, as reflected by the 1.5 percent drop by the NYSE Arca Computer Hardware Index.

Commodity, Currency Markets

Crude oil futures are slumping $1.18 to $83.47 a barrel after advancing $0.89 to $84.65 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,793.70, up $0.30 compared to the previous session’s close of $1,793.40. On Tuesday, gold slid $13.40.

On the currency front, the U.S. dollar is trading at 113.64 yen compared to the 114.16 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.1620 compared to yesterday’s $1.1596.

Asia

Asian stocks ended broadly lower on Wednesday as inflation worries persisted and investors awaited the Bank of Japan and European Central Bank policy meetings for directional cues.

U.S.-China tensions also remained on investors’ radar after the U.S. license of one of China’s biggest telecoms companies was revoked, citing national security concerns. Chinese shares fell sharply amid heightened U.S.-China tensions over Taiwan.

Meanwhile, media reports suggested that Hui Ka Yan, the billionaire founder of China Evergrande Group, was urged by government authorities to use his own wealth to alleviate a deepening debt crisis.

The benchmark Shanghai Composite Index slumped 35.33 points, or 1 percent, to 3,562.31. Hong Kong’s Hang Seng Index tumbled 409.53 points, or 1.6 percent, to settle at 25,628.74 after Modern Land became the latest Chinese developer to miss a payment on a dollar bond.

Japanese shares ended on a subdued note amid uncertainty heading into the general election. The Nikkei 225 Index finished marginally lower at 29,098.24, while the broader Topix closed 0.2 percent lower at 2,013.81.

Airline ANA Holdings gave up 1.2 percent after a report that it is expected to book an operating loss of around 110 billion yen ($960 million) for the April-September half. Rival Japan Airlines declined 1.8 percent.

Sony and SoftBank Group lost 2-3 percent, while Uniqlo operator Fast Retailing advanced 1.9 percent.

Australian stocks fluctuated before ending on a flat note after data showed Australian core inflation jumped to a six-year high in the third quarter.

Supermarket giant Woolworths tumbled 3.2 percent after flagging a slowdown in sales. Lower copper prices weighed on the mining sector, with BHP and Rio Tinto losing 1.4 percent and 1.8 percent, respectively.

Gold miner Evolution lost 2.4 percent and Northern Star Resources dropped 1.4 percent as bullion prices fell on dollar strength. Telecom giant Telstra Corp. bucked the weak trend to end 3.2 percent higher.

Seoul stocks retreated on foreign and institutional selling amid concerns that corporate earnings may wane after a strong third quarter. The benchmark Kospi lost 23.59 points, or 0.8 percent, to finish at 3,025.49, with tech, chemical and bank stocks leading losses.

In economic news, consumer confidence in South Korea improved in October, the latest survey from the Bank of Korea showed, with a Composite Consumer Sentiment Index score of 106.8 – up from 103.8 in September.

Europe

European stocks have edged lower on Wednesday as inflation worries persist and investors look ahead to the ECB meeting on Thursday for guidance on its pandemic bond-buying program.

Traders also awaited the budget announcement from U.K. Chancellor Rishi Sunak later today, where he is expected to reassure investors and consumers about the ongoing rise in inflation and unemployment.

While the German DAX Index has fallen by 0.4 percent, the French CAC 40 Index is down by 0.3 percent and the U.K.’s FTSE 100 Index is down by 0.2 percent.

Miners Anglo American and Glencore have moved notably lower in London as concerns about Chinese intervention hit metal prices.

Lender Deutsche Bank has also slumped after core bank profit before tax declined slightly in the third quarter.

Banco Santander has also tumbled even though the Spanish lender said it is on track to significantly outperform its profitability target for 2021.

On the other hand, FirstGroup has jumped. The transport group said it plans to return up to 500 million pounds to its shareholders through a tender offer at 105 pence per share.

HomeServe has also moved notably higher. The home repairs and improvements business said that it has completed the acquisition of CET Structures Ltd., a digitally enabled home emergency assistance business in the U.K., for circa 53 million pounds.

Schneider Electric shares have also risen in Paris. The energy management firm reported that its third quarter revenues were 7.22 billion euros, an increase of 11.8 percent from last year.

German design company Puma has also shown a strong move to the upside after raising its sales and profit forecasts for the year.

In economic news, the German import price index climbed 17.7 percent year-on-year in September following a 16.5 percent increase in August, Destatits reported. Economists had forecast an 18.0 percent increase.

The latest inflation rate was the highest year-on-year change since August 1981, when it was 19.5 percent.

German consumer confidence is set to improve in November on increasing propensity to consume, survey results from the market research group Gfk showed.

The forward-looking consumer confidence index rose to 0.9 in November from revised 0.4 in October. Economists had forecast the index to fall to -0.5.

The INSEE official statistics agency said that a gauge of French consumer sentiment fell 2 points to 99 in October from 101 in September.

U.K. shop prices slid 0.4 percent year-on-year in October after a 0.5 percent drop in the previous month, the British Retail Consortium said.

U.S. Economic Reports

After reporting a sharp increase in new orders for U.S. manufactured durable goods in the previous month, the Commerce Department released a report on Wednesday showing durable goods orders pulled back by much less than expected in the month of September.

The Commerce Department said durable goods orders fell by 0.4 percent in September after jumping by a downwardly revised 1.3 percent in August.

Economists had expected durable goods orders to slump by 1.1 percent compared to the 1.8 percent spike that had been reported for the previous month.

Excluding a steep drop in orders for transportation equipment, durable goods orders climbed by 0.4 percent in September after rising by 0.3 percent in August. The increase matched economist estimates.

At 10:30 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended October 22nd.

Crude oil inventories are expected to increase by 1.7 million barrels after edging down by 0.4 million barrels in the previous week.

The Treasury Department is scheduled to announce the result of this month’s auction of $61 billion worth of five-year notes at 1 pm ET.

Stocks In Focus

Shares of Robinhood (HOOD) are moving sharply lower in pre-market trading after the trading platform operator reported weaker than expected third quarter revenue.

Payments giant Visa (V) may also move to the downside after reporting better than expected fourth quarter results but providing guidance that disappointed some analysts.

On the other hand, shares of Enphase Energy (ENPH) are seeing significant pre-market strength after the solar company reported third quarter results that beat analyst estimates on both the top and bottom lines.

Music streaming service Spotify (SPOT) may also moved to the upside after reporting third quarter revenue and subscriber growth that exceeded expectations.