The Tuesday Market Minute

  • Global stocks slump as investors shift focus to slowing economic growth and fading corporate earnings ahead of the busiest week of the third quarter reporting season.
  • U.S. stocks poised for sharp declines, with Dow futures indicating a 380-point opening bell decline, following heavy selling in Europe and Asia.
  • Safe haven currencies, such as the dollar and the yen, hoard gains as investors shed risk amid rising tensions linked to the Jamal Khashoggi murder and the ongoing budget and Brexit negotiations in Europe.
  • European stocks open at near two-year lows following weaker industrial and tech earnings and ongoing weakness in Italy. 
  • U.S. corporate earnings kick into high gear today, with quarterly reports from Lockheed Martin, Caterpillar, Verizon, 3M, McDonald's and Harley-Davidson. 

Market Snapshot

Global stocks slumped Tuesday as investors focus to slowing economic growth and simmering geo-political tensions ahead of the busiest week of the U.S. earnings season and amid concern that corporate performance will begin to wane into the final months of the year.

A spate of U.S. blue chips with significant international exposure have reported earnings today, including Lockheed Martin (LMT) - Get Report , Caterpillar Inc., (CAT) - Get Report 3M Co.  (MMM) - Get Report and McDonald's (MCD) - Get Report , all of which will go a long way towards defining investor sentiment outside the United States amid growing concerns over trade, relations with Saudi Arabia, rising interest rates and Europe's twin crises linked to Brexit and fiscal discipline.

Domestic equity markets, however, are also showing signs of fragility, particularly after Haliburton's weaker-than-expected third quarter earnings and softer full-year outlook, as investor begin to pare bets on an extended rally as corporate profit growth slows amid fading U.S. tax cuts and rising interest rates from the Federal Reserve.

The S&P 500 (^GSPC) has fallen some 5.4% so far this month, including an 11.9 point decline last night, while the Dow Jones Industrial Average (^DJI) is sitting on an October decline of 4.31% after shedding 126 points over the Monday session.

The collection of geo-political risks, with an epicenter in Riyadh following the murder of prominent journalist Jamal Khashoggi at the Saudi consulate in Turkey, and its potential to both unsettle the ruling government and its relationship with the United States, rattled markets further Tuesday.

China's Monday rally, which saw markets rise the most in three years on reports of a $1.2 trillion tax cut that would shore up the flagging economy, faded, pulling the Shanghai Composite 2.3% lower and broader Asian market 2.05% to the downside heading into the final hours of trading. In Japan, safe-haven trading boosted the yen and pushed the Nikkei 225 to a 2.7% decline as the benchmark closed at 22,0101.78 points. 

U.S. equity futures followed suit, with contracts tied to the Dow indicating a 450 point opening bell decline while those linked to the S&P 500 suggested a 44 point slide for the broader benchmark. Nasdaq Composite (^IXIC) futures, which will be heavily influenced by Alphabet (GOOGL) - Get Report and Amazon (AMZN) - Get Report earnings later this week, were marked 132 points to the downside.

Dow component Caterpillar (CAT) - Get Report shares fell 7% to $120.00 each after the industrial equipment maker topped third quarter earnings forecasts but trimmed its full-year forecast by a few pennies as raw costs and tariffs bit hard.

3M traded 6.5% to $188.31 each after missing third quarter earnings estimates with a bottom line of $2.58 per share on sales of $8.2 billion.

European stocks were also sharply lower, with Germany's DAX performance index sliding more than 1.8% following the Asia sell-off and a confirmation of the Monsanto cancer verdict against Bayer AG , and France's CAC-40 1.6% is lower after weaker-than-anticipated earnings from global automaker Renault SA  (RNLSY)   .

The region-wide Stoxx 600 index was marked 1.13% to the downside in the opening minutes of trading and marked at 355.79 points, the lowest level since December 2016.

Apple Inc. (AAPL) - Get Report European supply chain tumbled Tuesday, pulling tech stocks in the region to the lowest level in more than a year, after chipmaker AMS AG (AMSSY) forecast softer profit margins in the months ahead despite solid third quarter earnings.

The Stoxx Europe 600 Technology subindex, the sector benchmark, slumped more than 3% in the opening hour of trading to 412.5 points, the lowest since August 2017.

Apple shares were marked 1.7% lower in pre-market trading and indicating an opening bell price of $216.91 each. 

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.11% lower in early European trading at 95.90, still near the highest in more than nine weeks, as investors continue to price in Fed rate hikes ahead of Friday's third quarter GDP reading. 

Curiously, despite the stronger dollar, export-focused American firms have seen earnings grow 16.5% so far this quarter, compared to 15.2% for those that are more focused domestically, suggesting that companies are failing to capitalize on the tight jobs market and the stronger consumer spending it should create.

And while the 22.2% growth estimate is impressive, corporate bottom lines have been trending lower since the start of the year, when earnings grew 26.3% in the first quarter and 25.8% over the three months ending in June.

Once the current tax cut impact, which Credit Suisse estimates has boosted profits by 7.5%, fades, comparative earnings will slow with it: first quarter earnings for 2019 are expected to grow by only 8.1%, the slowest in nearly three years, with the best quarterly estimate -- 11.9% -- not expected until the three months ending in September of next year.

Global oil prices weakened alongside the dollar's gains Tuesday, with investors also citing comments from Saudi Arabia's powerful energy minister, Khalid al-Falih, who said the Kingdom would remain a "constructive and responsible" player in world crude markets.

Brent crude contracts for December delivery, the global benchmark, were seen $1.83 lower from their Monday close in New York and changing hands at $78.00 per barrel, while WTI contracts for November delivery, which are more tightly liked to U.S gas prices, were seen $1.25 lower at $68.11 per barrel.