U.S. Stock Market Outlook | Three Major Index Futures Decline Together, Netflix and Texas Instruments Plunge After Earnings, Tesla to Release Financial Report After Hours

Pre-Market Market Trends

1. As of October 22 (Wednesday), U.S. stock index futures are all down before the market opens. As of the time of writing, Dow futures are down 0.00%, S&P 500 futures are down 0.04%, and Nasdaq futures are down 0.27%.

1. As of the time of writing, the German DAX index is down 0.21%, the UK FTSE 100 index is up 0.90%, the French CAC40 index is down 0.33%, and the Euro Stoxx 50 index is down 0.21%.

1. As of the time of writing, WTI crude oil is up 1.96%, priced at $58.36 per barrel. Brent crude oil is up 1.83%, priced at $62.44 per barrel.

Market News

U.S. stocks shift from strong bullishness to caution! Bank of America warns of five major risks. Since the bull market in U.S. stocks began over three years ago, Bank of America stock strategist Savita Subramanian has been a staunch optimist. However, recently even she and her team have found reasons to be concerned about the future direction of the stock market. Subramanian listed five emerging risks that could impact the S&P 500 index, including: the S&P 500 index valuation is at an extremely high level; signals of an impending bear market are accumulating; risks from missing government data; speculative activities and private lending risks; liquidity shocks. She warned that private credit risks could spread to banks, and forced selling of index funds by institutions could trigger a significant drop, recommending a focus on individual stock allocations.

The Fed is almost certain to cut rates next week, but the path for rates next year remains uncertain! A survey of economists indicates that the Fed will cut rates by 25 basis points next week and again in December; however, there is still significant disagreement among economists regarding the interest rate level by the end of next year. Economists provided seven different predictions for the end-of-year interest rate level, ranging from 2.25% - 2.50% to 3.75% - 4.00%. Part of the increased uncertainty is due to market speculation about who will succeed Chairman Powell when his term ends in May next year. The Fed currently faces dual risks: tariffs could further drive up already high inflation, while the labor market may weaken further. The Fed seems to place more emphasis on the latter, which is why it implemented its first 25 basis point rate cut since December 2023 last month.

Goldman Sachs Chief Economist: Market forecasts for U.S. GDP are overly optimistic. Goldman Sachs warns that market estimates for U.S. GDP may be too optimistic, as the data vacuum during the government shutdown could lead to employment data ultimately dragging down the originally optimistic outlook Goldman Sachs' chief economist Jan Hatzius emphasized that during the government shutdown, the estimated U.S. GDP surged sharply, with the second quarter expected to be 3.8% and the third quarter expected to be 3.3%. According to some estimates, this figure could be even higher. For example, the Atlanta Federal Reserve wrote in an update on October 17 that the third quarter GDP could be as high as 3.9%. Regarding employment, Hatzius pointed out that in surveys such as manufacturing and service sector growth, the labor market outlook index has been "well below 50, consistent with trends of stagnation or even contraction in employment." He added, "Since labor market indicators typically provide more reliable information about current economic growth than preliminary GDP estimates, this weakness further strengthens our belief that the GDP signals for the second and third quarters are overly optimistic."

Is U.S. inflation rising again? Alternative indicators show the highest growth in two years. According to PriceStats data based on online retail prices, U.S. inflation rose 2.6% year-on-year in September, the highest level in two years, marking the fifth consecutive month of increase, primarily driven by significant price increases in goods such as furniture and household appliances. Additionally, data shows that the consumer price index for durable and personal goods rose 6% month-on-month in September, the fastest month-on-month increase since June, mainly driven by rising costs of personal care products and communication equipment.

U.S. government shutdown lasts second longest in history, economic impact intensifies. The U.S. government shutdown has lasted 22 days, becoming the second longest government shutdown in U.S. history. This situation remains unresolved due to a stalemate between the two parties over the impending expiration of healthcare subsidies. With U.S. President Trump expected to visit Asia later this week, U.S. lawmakers and aides believe this government shutdown could last until November, potentially exceeding the 35-day shutdown during Trump's previous term. The economic impact of this government shutdown will further intensify this week. Economist Anna Wong stated that this government shutdown will lead to a slight temporary increase in the unemployment rate, but once the government resumes operations, the unemployment rate will return to 4.3%.

Individual Stock News

Unprecedented lineup, but profits face a "sneak attack"! Netflix (NFLX.US) misses earnings expectations due to Brazilian tax case. Netflix stated that its third-quarter profits were affected by a tax dispute with Brazil. The financial report showed that Netflix's third-quarter revenue grew 17% to $11.5 billion, in line with Wall Street expectations. However, due to Brazilian tax expenses, earnings per share were $5.87, below analysts' estimate of $6.94; quarterly operating profit was $3.24 billion, about $400 million lower than the company's own forecast and analysts' estimates. However, the company's performance outlook for the current quarter (fourth quarter) is generally consistent with Wall Street predictions. As of the time of publication, Netflix's stock fell nearly 7% in pre-market trading on Wednesday.

Under the shadow of tariffs, "King of Simulation" Texas Instruments (TXN.US) hints at a slowdown in recovery. The financial report showed that Texas Instruments' Q3 revenue grew 14% year-on-year to $4.74 billion, slightly above the market expectation of $4.65 billion; earnings per share were $1.48, falling short of the market expectation of $1.49 The company expects its overall revenue range for the fourth quarter to be between $4.22 billion and $4.58 billion, with the midpoint falling short of the market's expectation of about $4.5 billion; it anticipates earnings per share of approximately $1.26, below the market expectation of $1.39. Texas Instruments' performance outlook indicates that customers are slowing down their ordering pace in response to escalating global trade tensions and a relatively weak economic period. As of the time of writing, Texas Instruments' stock fell nearly 8% in pre-market trading on Wednesday.

Revenue growth of 15% + profit surge of 27%, Alliance West Bank (WAL.US) dispels regional bank panic with "better-than-expected earnings report" in Q3. The earnings report shows that the bank's revenue in the third quarter increased by 15.2% year-on-year to $938.2 million, and net profit surged over 27% year-on-year to $250.2 million, translating to earnings per share of $2.28, significantly exceeding the expectations of most Wall Street analysts, effectively alleviating the market's previous tension. Last Thursday, two regional banks, Zion Bank and Alliance West Bank, disclosed a loan fraud case that had triggered market panic. As of the time of writing, Alliance West Bank's stock rose nearly 2% in pre-market trading on Wednesday.

Intuitive Surgical (ISRG.US) Q3 revenue surged 23%, strong growth in da Vinci surgeries. The earnings report from Intuitive Surgical, a global technology leader in minimally invasive care and a pioneer in robotic-assisted surgery, shows that the company's revenue reached $2.51 billion in the third quarter, a year-on-year increase of 23%; GAAP earnings per share were $2.40, up from $1.84 in the same period last year. The significant revenue growth was primarily driven by an increase in surgical volumes, a rise in the deployment of da Vinci surgical systems, and an expansion in equipment installations. The company deployed 427 da Vinci systems and 50 Ion systems in Q3; surgical volumes increased by approximately 20% year-on-year, with da Vinci system surgeries growing by about 19% and Ion system surgeries growing by about 52%. As of the time of writing, Intuitive Surgical's stock rose over 17% in pre-market trading on Wednesday.

Barclays Bank (BCS.US) sets aside over £200 million for auto loan provisions but unexpectedly announces a buyback and raises full-year profit guidance. The bank announced an additional provision of £235 million (approximately $314 million) to compensate auto finance customers. Meanwhile, the bank raised its profit expectations for the year, stating that the return on tangible equity (RoTE) should exceed 11%, up from the previous expectation of around 11%; the full-year net interest income expectation was also slightly raised to £12.6 billion. The bank also announced a £500 million stock buyback plan. As of the time of writing, Barclays Bank's stock rose over 4% in pre-market trading on Wednesday.

AT&T (T.US) Q3 performance mixed, but new wireless user additions far exceed expectations. The earnings report shows that AT&T's Q3 revenue was $30.7 billion, below the market expectation of $30.87 billion; adjusted earnings per share were $0.54, roughly in line with market expectations. However, benefiting from bundled packages and aggressive promotional activities surrounding the launch of the latest iPhone—helping AT&T attract more customers in a competitive market—the company added more wireless users than expected. Data shows that AT&T added 405,000 new monthly paying wireless subscribers in Q3, exceeding the market expectation of 334,100 Price increases offset the impact of major copper mine shutdowns, Teck Resources (TECK.US) Q3 profit grew nearly 20% exceeding expectations. The financial report shows that its adjusted core earnings in the third quarter rose to CAD 1.17 billion (approximately USD 836 million), up from CAD 986 million in the same period last year, thanks to rising copper and zinc prices as well as increased by-product revenue. Q3 revenue increased by 18% year-on-year to CAD 3.38 billion. The company stated that its profits in the third quarter grew significantly by nearly one-fifth, as rising metal prices offset the impact of production disruptions at its major copper mine in Chile.

Short squeeze drives Beyond Meat (BYND.US) to continue soaring! Following a surge of 128% and 146% on Monday and Tuesday respectively, as of the time of writing, Beyond Meat's stock rose nearly 75% again in pre-market trading on Wednesday. This rapid increase in the stock is mainly attributed to a short squeeze that occurred after the company completed a debt-to-equity conversion last week. Analysts indicate that the recent rise in Beyond Meat's stock price is clearly driven by the short squeeze rather than fundamental factors, as the current valuation of the stock has fully reflected its challenging transformation prospects. Additionally, there are reports that Beyond Meat will increase the supply of certain products in over 2,000 Walmart stores, which is expected to help the company overcome its operational difficulties.

Important Economic Data and Event Forecast

04:00 Beijing time the next day, Federal Reserve Governor Barr will give a speech on "financial inclusion."

Earnings Forecast

Thursday morning: Tesla (TSLA.US), IBM (IBM.US), Alcoa (AA.US), SAP (SAP.US), Lam Research (LRCX.US)

Thursday pre-market: Nokia (NOK.US), STMicroelectronics (STM.US), Lloyds (LYG.US), Freeport-McMoRan (FCX.US), T-Mobile US (TMUS.US), Union Pacific (UNP.US), Southwest Airlines (LUV.US), American Airlines (AAL.US)