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Futures lower, bank earnings ahead, Tesla's robotaxi event - what's moving markets

Published 10/11/2024, 03:53 AM
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Investing.com -- US stock futures point lower ahead of a batch of big bank earnings, including quarterly figures from JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC). Tesla (NASDAQ:TSLA) reveals its new robotaxi offering in a much-anticipated event in Los Angeles, and Warren Buffett's Berkshire Hathaway (NYSE:BRKa) lowers its stake in Bank of America below a key threshold.

1. Futures lower

US stock futures hovered below the flatline on Friday as investors looked ahead to a slew of earnings from big Wall Street banks and assessed fresh inflation data.

By 03:48 ET (07:48 GMT), the Dow futures contract had slid by 46 points or 0.1%, S&P 500 futures had shed 8 points or 0.1%, and Nasdaq 100 futures had dipped by 37 points or 0.2%.

The main averages closed the prior session in the red following Labor Department numbers that showed hotter-than-anticipated price growth in September. First-time claims for unemployment benefits last week were also higher than economists had projected.

Both data points come as the Federal Reserve is attempting to engineer a "soft landing" for the US economy, in which once-elevated inflation is defeated without igniting a sharp downturn in the labor market or broader activity. The Fed slashed interest rates by an outsized 50 basis points last month, arguing that it was necessary to help bolster labor demand during a time of waning inflationary pressures.

In the wake of the data, traders were pricing in a roughly 86% chance the central bank will roll out a more traditional 25-basis point reduction at its next meeting in November, according to the CME Group's (NASDAQ:CME) closely-monitored FedWatch Tool. There was about a 14% probability that the Fed would keep borrowing costs unchanged at a range of 4.75% to 5.00%.

2. Bank earnings ahead

Markets will be eyeing returns from JPMorgan Chase and Wells Fargo on Friday that are due to kick off the latest earnings season for the US banking sector.

The lenders are widely expected to report a slide in third-quarter profits, reflecting a potential drop in net interest income due to falling borrowing costs. Net interest income, which measures the difference between what banks pay for deposits and earn from loans, had been boosted in recent years after the Fed aggressively lifted interest rates in order to quell sky-high inflation.

As a result, the lenders' forecasts are tipped to be a major focus for investors, especially as the Fed embarks on a possible cycle of policy easing following the string of rate hikes. More rate cuts could cut into net interest income, although it may spark increased borrowing and dealmaking.

Meanwhile, analysts anticipate that these companies' investment banking units were boosted by an uptick in the amount of debt issuance and initial public offerings. A jump in market volatility is seen bolstering trading segments as well, but revenues are typically slower in the third quarter compared to the prior three-month period, Reuters reported, citing Moody's (NYSE:MCO) analysts.

3. Tesla unveils "Cybercab" 

Tesla shares dipped in premarket US trading on Friday after the group unveiled its long-awaited "Cybercab" robotaxi, although analysts flagged that CEO Elon Musk provided few answers to crucial questions surrounding the technology.

The Cybercab model, which has no steering wheel or pedals and seats two, will likely go into production before 2027 and will be available for less than $30,000, Musk said. However, the tech tycoon, who entered the event in Los Angeles riding in a Cybercab, noted that the service would still need to clear a variety of regulatory hurdles.

Shares in Tesla have surged since it first announced a "robotaxi day" in April, as Musk estimated that the new offerings could boost the company's valuation to as high as $5 trillion from its current level of just over $748 billion.

“It’ll save lives,” Musk said, adding that autonomous vehicles will be “ten times” safer than human drivers.

Tesla also showed off a prototype for "the Robovan," an autonomous vehicle capable of seating up to 20 people, as well as an updated model of its humanoid robot, called “Optimus.”

Tesla’s pivot into artificial intelligence and autonomous driving comes as the company grapples with a steady decline in sales stemming from increased competition in top market China and sluggish sales in the West.

4. Buffett's Berkshire Hathaway cuts stake in Bank of America to below 10%

Warren Buffett's Berkshire Hathaway has offloaded another batch of its holdings in Bank of America this week, this time taking its stake in the US lender below 10%.

Berkshire sold 9.5 million shares worth a little over $382 million this week, a regulatory filing on Thursday showed.

By bringing the stake under 10%, Berkshire's holdings fall below a key Securities and Exchange Commission threshold that would require the Nebraska-based conglomerate to disclose stock purchases and sales within two business days.

This means Bank of America investors will likely now need to wait until Berkshire's quarterly financial reports or stock holdings disclosures to learn if it sold more.

5. Oil volatile

Oil prices were choppy on Friday, although they remained on pace set for a second straight weekly gain, as investors gauged the impact of hurricane damage in the US and tensions in the Middle East.

By 03:47 ET, the Brent contract had slipped by 1.1% to $78.57 per barrel, while U.S. crude futures (WTI) traded 1.1% lower at $75.05 per barrel.

For the week, both benchmarks were headed for gains of around 1%.

In the US, Hurricane Milton cut a destructive path across Florida, leaving millions without power. The destruction could dampen fuel consumption in the world's largest oil producer and consumer.

Additionally, traders were on edge over a potential escalation in the conflict in the Middle East, especially if Israel targets Iran’s oil facilities.

(Reuters contributed reporting.)

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