4:10pm: Earnings anticipation
All three major indexes fluctuated between gains and losses on Wednesday before ultimately closing in negative territory.
The Dow Jones dipped around 0.2%, the S&P 500 declined by over 0.3%, and the tech-focused Nasdaq fell by nearly 0.6%.
2:55pm: What to expect from Microsoft, Meta
Here's a look at what analysts are expecting for the two big earnings reports due after the bell tonight.
Microsoft Corp (NASDAQ:MSFT) (Microsoft Corp (NASDAQ:MSFT)) is set to report higher earnings on increased revenue for the September quarter, the first quarter of fiscal 2025.
After tonight's closing bell, the software maker is set to report earnings per share (EPS) of $3.08, up 3% from $2.99 in the year-ago quarter.
Revenue is expected to grow by almost 14% to $64.41 billion, compared to $56.52 billion in Q1 2024.
During Microsoft’s Q4 2024 earnings call in July, CFO Amy Hood noted that Q1 revenue would be impacted by a less than 1-point foreign exchange headwind.
Gross margins are expected to be about 70%, attributed by Hood to the impact of the company scaling its AI infrastructure.
Meanwhile, Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB) (Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB), Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB), Meta Platforms Inc (NASDAQ:META, ETR:FB2A, SWX:FB)) is expected to deliver a third quarter earnings beat amid high expectations, analysts at Bank of America believe.
The analysts expect revenue of $40.4 billion and earnings per share of $5.35, above the Street consensus of $40.2 billion and $5.19, respectively.
Strength is expected to be driven by new AI tools and new Customer Relationship Management (CRM) management driving higher return on investment and incremental ad spend; ramping messaging and Reels monetization; and modest political ad spend benefit.
They project 3Q daily active people of 3.32 billion, up 2% quarter-over-quarter, and average revenue per user of $12.06, pointing to Sensor Tower data which suggests “healthy” Instagram time spent and user growth.
1:10pm: Pending home sales surge in September
Lost in the GDP and earnings noise today is the news that pending home sales saw the biggest gains in nearly four years.
Pending home sales surged in September, rising 7.4% month-over-month, well above the 1.9% expected. This marked the first year-over-year increase (2.2%) since November 2021.
Despite the positive signs, pending sales remain over 40% below their August 2020 peak, when the housing market boomed due to pandemic-driven demand and low mortgage rates.
Looking ahead, the Federal Reserve’s anticipated rate cuts in 2025 are expected to further lower mortgage rates, potentially boosting the housing market.
Comerica's Bill Adams called 2024 a "very bad year" for existing home sales across the US.
"Demand was weak, held back by high mortgage rates," Adams said.
"Supply was weak, too, held back by owners’ reluctance to let go of low mortgages and tax assessments locked in years ago."
But 2025 is gearing up to be "considerably better," according to Adams.
"The latest inflation data in the GDP report for the third quarter shows that inflation continues to slow toward the Fed’s 2% target. And today’s ADP report on private payrolls shows that wage growth is moderating too, even as payroll growth picked up in the month."
12:15pm: Stocks hold steady
The Nasdaq gained ground on strong earnings from Alphabet, boosting optimism for Big Tech, adding 25 points by midday.
Elsewhere the Dow Jones rose 0.3%, while the S&P 500 added around 0.2%.
Investors await earnings reports from Meta and Microsoft this afternoon, with Big Tech results seen as critical for the ongoing stock rally.
Meanwhile, key GDP and labor market data continue to inform the Federal Reserve's upcoming interest rate decision.
10:55am: 'Well heeled millennials' driving consumer spending
Some more highlights from the GDP Q3 report.
Defense spending surged nearly 15% on an annualized basis, marking the largest increase since 2003, though this spike is expected to taper off next quarter.
Real final sales to private domestic purchasers grew by 3.2%, driven by middle- and upper-income consumers who continue to have cash on hand.
Capital expenditures were bolstered by robust technology spending, fueled by ongoing enthusiasm around artificial intelligence.
"Looking ahead, we should not expect government spending to contribute to growth as much as it did in Q3," Jeffrey Roach, Chief Economist for LPL Financial wrote.
"From a separate report from the New York Fed, well-heeled millennials are driving consumer spending. As long as they have the appetite and ability to spend, business activity will remain stable. According to this morning’s report, inflation eased considerably throughout Q3 which increases the odds the Fed will cut at both of the upcoming meetings this year."
9.48am: Stocks open lower, led by S&P and Nasdaq
Wall Street's main indices have stumbled in early treading.
The Dow Jones is down 0.1%, the S&P 500 has dropped 0.2% and the Nasdaq the same. The small cap Russell 2000 is down 0.3%.
In the Dow there are just six stocks in the green, led by Visa and Amazon, while in the S&P it's roughly half and half.
Super Micro Computer is down 27% after its auditor resigned; Eli Lilly is down 11% after it turned in results showing lower sales and earnings than expected, blaming high manufacturing costs and fluctuating inventory levels.
Risers are led by Garmin, up 12% on strong earnings and a raised outlook, while Alphabet's two main share classes have gained around 7%.
9.10am: Super Micro plummets
Shares in Super Micro Computer have plummeted 29% in premarket trading after its auditor resigned.
Ernst & Young sent a letter of resignation to the members of the audit committee last week, the data center solutions provider said in a filing.
8.55am: GDP and ADP jobs report
Third-quarter US GDP growth came in at 2.8% annualised, down from the 3.0% pace in the second quarter that was expected to be continued.
"Despite earlier fears that the US economy was headed for recession, growth continued to out-perform other developed markets," says Paul Ashworth, chief North America economist at Capital Economics.
"Admittedly, we were looking for a 3.5% gain when we previewed the data last week, but most estimates would have been pulled down by roughly 0.5% points yesterday, following the release of the September advance economic indicators that showed a big pre-port strike surge in goods imports."
The ADP jobs report is in, with a 233K increase in private payrolls in October, which is double the consensus forecast of 111K.
"This looks strong but take a deep breath," says Samuel Tombs, chief US economist at Pantheon Macroeconomics.
He notes that ADP’s track record in predicting the first official estimate of each month’s private payroll number is "no better than just looking at the previous six months’ average official reading".
ADP also offers "no special insight" into the impact of major hurricanes in the past.
"We expect only a modest hit to payrolls from Milton, because it landed on the Wednesday of the survey week so most weekly-paid people likely had already done some work before the storm, so will count in the numbers.
"But it’s hard to imagine that the hurricane somehow propelled job growth in the affected region upwards. Accordingly, we’re sticking with our 100K forecast for October payrolls."
8.40am: Nasdaq to extend record high
US stock markets are expected to be mixed at the open on Wednesday, following a mixed session the day before.
Futures markets predict the Dow Jones will fall almost 0.2%, while the S&P 500 will be just below flat and the Nasdaq just above flat.
Overnight, the S&P 500 inched 0.2% higher despite over two-thirds of its constituents falling on the day, as big tech stocks drove gains, with the Nasdaq rising 0.8% to a record high and the Dow Jones falling 0.4%.
Shares in Google parent Alphabet Inc (NASDAQ:GOOG) are up 6% premarket, with investors impressed with a quarterly sales and earnings beat thanks to growth from its cloud computing arm.
Macro data on Wednesday includes the ADP jobs report and the first reading of GDP for the third quarter.