U.S. Stock Market Outlook | Three major stock index futures all decline, oil prices surge, Tesla and IBM drop after earnings, Intel to announce financial report after hours

Pre-Market Market Trends

1. As of October 23 (Thursday) pre-market, U.S. stock index futures are all down. As of the time of writing, Dow futures are down 0.20%, S&P 500 futures are down 0.11%, and Nasdaq futures are down 0.21%.

1. As of the time of writing, the German DAX index is down 0.15%, the UK FTSE 100 index is up 0.62%, the French CAC40 index is up 0.40%, and the Euro Stoxx 50 index is up 0.30%.

1. As of the time of writing, WTI crude oil is up 5.18%, priced at $61.53 per barrel. Brent crude oil is up 4.71%, priced at $65.54 per barrel.

Market News

Interest rate cut expectations outweigh inflation concerns, making it difficult for the U.S. September CPI to change the optimistic atmosphere in the stock market. Investors are expected to ignore any signs of persistent inflation in the U.S. September Consumer Price Index (CPI) report this Friday, as market sentiment remains dominated by optimistic expectations for a Federal Reserve interest rate cut next week. JPMorgan's trading department believes that even if economists expect inflation data to be higher than expected, there is still about a 65% chance that the S&P 500 index will rise after the data is released. Analysts at the bank noted that volatility in the U.S. stock market on the day the September CPI is released may be "lower than usual," as investors expect the Federal Reserve to cut rates again on October 29, and this confidence may offset inflation-related concerns. Andrew Tyler and his team predict that if the CPI data meets or falls below expectations, the S&P 500 index could rise by as much as 1.5% on Friday. Conversely, if core inflation rises more than 0.4% month-on-month, it could lead to a decline of about 2.3% in the S&P 500 index.

SlateStone strategists: U.S. stocks still have upside potential, but should shift to defensive sectors. SlateStone's Chief Equity Strategist Erin Gibbs suggests that while investors maintain an overall bullish stance, they should adopt a defensive positioning in the U.S. stock market. She believes that investors should pull out of overvalued tech stocks and shift to defensive sectors such as healthcare and telecommunications, which offer better value when the U.S. stock market's upward momentum may slow down. Erin Gibbs does not recommend completely exiting U.S. stocks but advocates for tactical adjustments. She specifically mentioned Thermo Fisher Scientific (TMO.US) as a quality target in the healthcare sector expected to achieve sustained profit growth. When asked about the upcoming inflation data and the Federal Reserve's possible interest rate cuts, Erin Gibbs stated that a rate cut would be "the icing on the cake," but not a necessary factor for maintaining market strength U.S. CPI data is about to be released, and the dollar shows bullish signals. At the beginning of this quarter, the dollar's performance has been stronger. There are signs that traders are preparing for further bullish momentum for the dollar, despite the delay in the release of U.S. consumer price data this week. This month, the dollar has strengthened against almost all major currencies, partly due to safe-haven buying driven by concerns over credit in U.S. regional banks. Brent Donnelly, president of Spectra Markets, stated: "Given that the market has fully priced in two rate cuts by the Federal Reserve, the risks of the CPI data are asymmetrically skewed to the upside, and the asymmetry of capital flows from now until the end of the month will favor buying the dollar." He suggested going long on the dollar in the next two weeks.

Is the "mad bull" market for gold nearing its end? Truist Advisory: The significant drop in gold prices indicates that the correction will continue. Gold recorded its largest single-day drop since 2020 on Tuesday. Truist Advisory strategist Keith Lerner pointed out: "This sell-off was not triggered by a single factor; rather, the recent upward trend in gold has entered an unsustainable rhythm, making it prone to a significant reversal." "It's like a rubber band being stretched too far, and the eventual rebound could be substantial." He emphasized that when market trends enter an unsustainable state, the speed of momentum reversal can be very fast. The strategist noted that the 12-month outlook is particularly challenging. Historical data shows that after such significant single-day declines, the median return for gold within a year is negative, with only about 40% of cases achieving positive returns.

The U.S. imposes sanctions on two major Russian oil giants, causing international oil prices to surge. The U.S. Treasury has blacklisted state-owned Russian oil giants Rosneft PJSC and Lukoil PJSC. This is the latest move by the Trump administration to pressure President Putin to negotiate an end to the war in Ukraine. It is estimated that these two oil companies are the largest oil producers in Russia, accounting for nearly half of Russia's crude oil exports, with an average daily export volume of about 2.2 million barrels in the first half of this year.

Individual Stock News

Musk's "AI and Robotics Vision" clashes with the reality of auto company reports, as Tesla (TSLA.US) sees a more than 30% drop in Q3 profits. Data shows that Tesla's overall revenue in Q3 increased by 12% year-on-year to $28.1 billion, exceeding Wall Street analysts' average expectation of about $26.3 billion. However, the adjusted earnings per share were about $0.50, falling short of Wall Street's average expectation of $0.54, and representing a significant year-on-year decline of 31%. Some seasoned analysts believe that Tesla currently seems to lack a reliable growth narrative and plan, and the weak profits combined with the still vague narratives around artificial intelligence and humanoid robots make it difficult to support the current high valuation, making the company's stock price susceptible to rapid market adjustments and negative fundamental data. As of the time of writing, Tesla's stock fell over 3% in pre-market trading on Thursday.

Core growth engine stalls! Red Hat's growth below expectations drags down IBM (IBM.US) performance. IBM's revenue from two key software categories was disappointing, one of which includes the closely watched Red Hat division The financial report shows that IBM's revenue in the third quarter was $16.33 billion, a year-on-year increase of 9.1%, exceeding expectations; excluding certain items, the profit was $2.65 per share, surpassing market expectations. The hybrid cloud division, including Red Hat, saw sales growth of 14% in the third quarter, which slowed compared to the previous quarter and was below the analysts' average estimate of 16%. For the fiscal year ending in December, IBM stated that free cash flow would reach approximately $14 billion, higher than the analysts' estimate of $13.5 billion. As of the time of publication, IBM's stock fell over 7% in pre-market trading on Thursday.

Weak recovery in chip demand under geopolitical shocks, STMicroelectronics (STM.US) expects Q4 revenue to fall short of expectations. STMicroelectronics' revenue in the third quarter declined by 2% year-on-year to $3.19 billion, slightly above the market expectation of $3.163 billion; earnings per share were $0.29, higher than the market expectation of $0.23; operating profit fell sharply by 53% year-on-year to $180 million, below expectations. The company expects fourth-quarter revenue to be $3.28 billion, lower than the market expectation of $3.35 billion. This result intensified market concerns about the stagnation of recovery in the mature semiconductor industry. Coincidentally, the earnings forecast released by its competitor Texas Instruments also disappointed investors, indicating that customers are reducing orders due to escalating trade tensions and economic instability. As of the time of publication, STMicroelectronics' stock fell over 9% in pre-market trading on Thursday.

Trade war burns German software giant! SAP (SAP.US) Q3 cloud business revenue "hits the brakes," growth rate hits a nearly two-year low. SAP SE's cloud business revenue in the third quarter fell short of analysts' expectations, indicating that trade disputes and economic weakness are putting pressure on its sales. Adjusted cloud business revenue for the third quarter was €5.29 billion (approximately $6.1 billion), while the market expectation was €5.33 billion, with a year-on-year growth rate of 22%, but this is the slowest growth rate since the fourth quarter of 2023. Overall revenue grew by 7% to €9.08 billion (approximately $10.59 billion), also failing to meet the analysts' expectation of €9.17 billion. Operating profit under non-IFRS standards grew by 14% to €2.57 billion, slightly above the expected €2.55 billion.

High aluminum prices alleviate tariff pain! Alcoa (AA.US) Q3 net profit increased by 158% year-on-year, Q4 tariff costs may rise by another $50 million. Alcoa's revenue in the third quarter reached $2.995 billion, an increase from $2.904 billion in the same period last year; the net profit attributable to the company was $232 million, compared to $90 million in the same period last year, a year-on-year increase of nearly 158%. The financial report shows that tariffs imposed by the U.S. on Canadian aluminum led to an increase of $69 million in losses for the company this quarter compared to the previous quarter, but rising domestic aluminum prices effectively offset this impact, with the Midwest premium increase sufficient to compensate for the net adverse impact of Canadian smelter aluminum import tariffs. Meanwhile, the company stated that the aluminum exports from Canada to the U.S. that were cut earlier this year have returned to normal levels. As of the time of publication, Alcoa's stock rose nearly 2% in pre-market trading on Thursday AI demand ignites equipment procurement! Lam Research (LRCX.US) Q1 performance exceeds expectations, guidance reaffirms industry high prosperity. Benefiting from chip manufacturers increasing their procurement of equipment needed for the production of artificial intelligence (AI) applications, Lam Research announced better-than-expected first-quarter financial results and performance guidance. The financial report shows that in the first quarter ending September 28, Lam Research achieved revenue of $5.32 billion, a year-on-year increase of 27%, exceeding the market expectation of $5.23 billion. The adjusted earnings per share were $1.26, higher than the market's general expectation of $1.22, with an adjusted gross margin of 50.6%, slightly above the estimated level of 50%. The company expects revenue to reach $5.2 billion in the second quarter ending December 28, with a fluctuation of $300 million, compared to the analyst's general expectation of $4.81 billion. The adjusted net earnings per share are expected to be $1.15, with a fluctuation of 10 cents, while the market expectation is $1.04.

Strong consumer demand in North America, Unilever (UL.US) Q3 core sales exceed expectations. Unilever's third-quarter sales exceeded expectations, thanks to strong demand in developed markets (especially in North America) and cost control measures. The company stated that its core product sales increased by 3.9% compared to the same period last year, slightly higher than the analyst's forecast of 3.7%. Operating income fell by 3.5% to €14.7 billion, due to adverse impacts from exchange rates and asset disposals of 6.1% and 1%, respectively. However, sales volume increased by 1.5%, and prices rose by 2.4% (higher than the analyst's expectation of 2.2%). Excluding the ice cream business, core sales grew by 4%. Unilever reiterated its full-year performance expectations, with core sales growth expected to remain in the range of 3% to 5%. As of the time of writing, Unilever's stock rose over 2% in pre-market trading on Thursday.

Network infrastructure business boosts Nokia (NOK.US) performance! Q3 sales increased by 12% year-on-year, operating profit exceeds expectations. Thanks to the growth of network infrastructure and optical network businesses, 5G equipment manufacturer Nokia's Q3 earnings performance exceeded market expectations. The financial report shows that Nokia's Q3 net sales increased by 12% year-on-year to €4.828 billion, better than the analyst's average expectation of €4.64 billion. Adjusted operating profit decreased by 10% year-on-year to €435 million, but was better than the analyst's average expectation of €324 million; adjusted earnings per share were €0.06, unchanged from the same period last year. As of the time of writing, Nokia's stock rose nearly 8% in pre-market trading on Thursday.

Lloyds Banking Group (LYG.US) Q3 profit misses expectations, but raises full-year net interest income guidance under additional provisioning pressure. Lloyds Banking Group raised its full-year net interest income expectations, despite the bank expecting a slowdown in UK economic growth and its Q3 profit decline exceeding expectations. The financial report shows that Lloyds Banking Group's Q3 net profit was £4.64 billion, a year-on-year increase of 7%; net interest income was £3.45 billion, also a year-on-year increase of 7%. However, Q3 pre-tax profit fell by 36% year-on-year to £1.17 billion, below the analyst's average expectation of £1.45 billion Despite this, Lloyds Bank currently expects net interest income for the full year 2025 to reach £13.6 billion, higher than the previous expectation of £13.5 billion. Although the bank assumes that the UK economy will grow slowly, a moderate pace of interest rate cuts is generally beneficial for bank profitability.

The Trump administration is negotiating to invest in several quantum computing companies, with IonQ (IONQ.US), Rigetti (RGTI.US), and D-Wave (QBTS.US) seeing their stock prices soar. The Trump administration is in talks to invest in several key enterprises. Following this news, stocks in the quantum computing sector surged significantly in pre-market trading on Thursday. Companies including IonQ, Rigetti Computing, and D-Wave Quantum are negotiating with the U.S. government to become shareholders, as part of an agreement to secure specialized funding aimed at supporting promising technology companies. This move indicates that the Trump administration is expanding its intervention in what it considers key economic sectors.

QuantumScape (QS.US) surges in pre-market trading after raising its full-year EBITDA guidance. Solid-state battery manufacturer QuantumScape reported a third-quarter loss that was lower than expected and raised its full-year adjusted EBITDA forecast. The company reported a loss of $0.18 per share, compared to analysts' expectations of a loss of $0.20; adjusted EBITDA was -$61.4 million, in line with the company's guidance. QuantumScape revised its full-year adjusted EBITDA loss expectation from the previous $250 million to $270 million down to $245 million to $260 million, citing ongoing improvements in operational efficiency under its light capital authorization model. As of the time of writing, QuantumScape's stock rose over 11% in pre-market trading on Thursday.

Important Economic Data and Event Forecasts

At 22:00 Beijing time, Federal Reserve Vice Chair for Supervision Michael Barr will testify before the U.S. Senate Banking Committee on the oversight of financial regulatory agencies.

At 22:25 Beijing time, Federal Reserve Governor Christopher Waller will speak on "community investment" at a tax conference.

Earnings Forecasts

Friday morning: Intel (INTC.US), Newmont Corporation (NEM.US), Ford (F.US)

Friday pre-market: Sanofi (SNY.US), Eni (E.US), Procter & Gamble (PG.US)