By Mike Dolan
Oct 22 (Reuters) – The first Big Tech earnings of the season have been a mixed bag so far and haven’t yet shifted the dial on the main market themes, leaving overnight index futures on the back foot.
What looks to be a distinctly “risk-off” day across world markets appears to be a reaction to the latest surge in world oil prices to their highest level since May, as well as another jarring jump in French bond yields and risk premia.
Despite a plethora of diplomatic moves to end the Iran and Ukraine wars earlier this week, there was little sign of any breakthrough, and bombing and attacks continued overnight in the Middle East and in Kyiv. Brent crude leapt another 3% to more than $112 per barrel.
French 10-year debt yields topped 5% on Wednesday and climbed further first thing today. Its risk premium versus German debt blew out further to 165 basis points – the widest since 2011 – as markets fret about the stalled budget, a possible credit rating downgrade as soon as Friday and fears about another weekend of rioting on the streets.
Back on Wall Street, stock index futures are down sharply, and that’s dragged Treasury yields down too in another bout of risk aversion.
Meta’s stock did rise briefly on its slight earnings beat on Wednesday amid much focus on the success and input pressures surrounding the launch of its new Muse AI agent. But it’s burning cash for the first time in over a decade as it nudges up spending plans and issues more shares to bolster financing too. As a result, its stock price reversed course before today’s bell and is now down 3%.
For Tesla, all the talk is now about a potential merger with SpaceX, but its shares slipped another 5% overnight after its latest update. While it reported a positive free cash flow once again, its capex and car sales targets to 2030 came in well below forecast.
Despite that, AI server maker Super Micro soothed jitters about the overall AI story a bit after a hefty revenue beat sent its stock up more than 10% on Wednesday.
But even Super Micro was caught in the downdraft overnight and it gave back half of yesterday’s gains.
CHART OF THE DAY
Shares in Facebook and Instagram parent Meta Platforms gave up early gains in overnight trading after the firm announced a new class of stock to fund its AI push, even as it beat third-quarter revenue estimates and gave a strong fourth-quarter outlook.
Clocking its first quarterly cash burn in more than a decade, Meta reported negative free cash flow totaling $2 billion in the third quarter compared with positive cash flow of almost $11 billion a year earlier.
TODAY’S EVENTS TO WATCH
• US corporate earnings: Procter & Gamble, Union Pacific, Western Digital, Lockheed Martin
• US weekly jobless claims (8:30 a.m. EDT), US 5-year TIPS auction (1 p.m. EDT)
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