The Wednesday Market Minute

  • Global stocks extended gains Wednesday, driven by stronger-than-expected U.S. earnings and the biggest single-day rally on Wall Street in more than six months.
  • U.S. earnings season is expected to add $400 billion to the collective bottom line of S&P 500 companies, with year-on-year gains of 21.5%, more than twice the rate of European earnings growth.
  • Netflix surges in after-hours trading after smashing quarterly subscriber addition forecasts as tech rebounds firmly amid stronger fundamentals and easing interest rate pressures.
  • U.S. equity futures point to mixed open on Wall Street with markets eyeing earnings from Aloca, Abbott Labs, US Bancorp and eBay. 

Market Snapshot

Global stocks pared gains Wednesday, following the biggest single-day surge on Wall Street in more than six months, as investors shifted focus to the strength of U.S. corporate earnings season even as geopolitical tensions and ongoing trade disputes capped gains in Europe and Asia.

A series of stronger-than-expected blue-chip earnings Tuesday, including Dow components UnitedHealth Group (UNH) - Get UnitedHealth Group Incorporated Report and Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. (GS) Report , boosted U.S. markets yesterday and ignited the strongest rally since later March as investors re-set expectations for the third quarter earnings season, which is set to add a more than $400 billion to the collective bottom line of S&P 500 listed companies. 

Tech stocks, which rose more than 2% in the Tuesday rally, were given added fuel from a stronger-than-expected earnings report from Netflix (NFLX) - Get Netflix, Inc. (NFLX) Report after the close of trading, with the online streaming service adding nearly 7 million new subscribers and topping Wall Street estimates with an 89 cents per share bottom line that sent the stock surging more than 14% in after-hours trading.

Asia stocks reacted in kind, with Japan's Nikkei 225 rising 1.3% to close at a one-week high of 22,841.12 points while the broader MSCI Asia ex-Japan index was marked 0.56% higher into the final hours of trading, with gains supported by a late-session rebound in China, where the Shanghai Composite added 0.6% to close at 2,561.65 points.

Early indications from U.S. equity futures, however, suggest a mixed start for Wall Street Wednesday, with  contracts tied to the Dow Jones Industrial Average I:DJI indicating a 92 point slide while those linked to the S&P 500 undefined suggest a 4.5 point downside bump for the broader benchmark. Nasdaq Composite I:IXIC futures indicate a 68 point gain for the tech-focused benchmark, thanks in part to the anticipated gains from Netflix.

International Business Machines Corp. (IBM) - Get International Business Machines (IBM) Report shares slumped in pre-market trading Wednesday after the technology giant posted weaker-than-expected third quarter revenues as cloud computer deliveries slowed and a stronger U.S. dollar weighed on international sales, complicating the uneven turnaround engineered by CEO Ginni Rometty.

IBM shares were marked 4.5% lower in pre-market trading Wednesday, indicating an opening bell price of $138.34 each, a move that would extend its year-to-date decline to around 10 and value the Armonk, New York-based group at just under $130 billion. Further downward pressure may come from Morgan Stanley, which cut its IBM price target early Wednesday to $168 from $185.

Europe stocks were solid at the open, as well, but the Stoxx 600 fell 0.2% by mid-day in Frankfurt even amid a series of solid regional earnings, including publisher Pearson plc (PSO) - Get Pearson PLC Sponsored ADR Report , chipmaker ASML NV (ASML) - Get ASML Holding NV ADR Report and Dutch paint maker Akzo Nobel NV (AKZOY)

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ASML surged to the top of the European market Wednesday, lifting tech peers in its wake, as the chipmaker forecast stronger-than-expected fourth quarter sales for its key lithography machines and topped analysts forecast for third quarter earnings in what could mark a late cycle rebound for the beaten-down sector.

ASML shares jumped more than 6.8% in Amsterdam following the release, topping the Stoxx 600 benchmark and rising to the highest level since early September. Peer chipmakers were also on the move, with AMS AG (AMSSY) , a key Apple Inc. (AAPL) - Get Apple Inc. (AAPL) Report supplier, rising 4.5% and STMicroelectronics (STM) - Get STMicroelectronics NV ADR RegS Report gaining 4.8% to change hands at €15.54 each. Germany's Infineon Technologies (IFNNY) gained 3.12% in Frankfurt to trade at €19.54 each.

The U.S. earnings strength, coupled with solid industrial output and jobs data, suggests the bullish underpinning to the world's biggest economy has enough momentum to last until at least the end of this year, even as global fund managers begin to question the resilience of markets in other parts of the world.  

Investment managers are the most pessimistic on world economic growth since the financial crisis, according to Bank of America Merrill Lynch's benchmark monthly survey, which polled 231 investment managers who run more than $646 billion worth of assets.

A record 85% of the survey respondents said the global economy is in the later stages of its growth cycle, a figure that is some 11 percentage points higher than the previous high of December 2007. When asked how the global economy will develop over the next year, a net 38% said they expect a slowdown, and that's the worst outlook on global growth since November 2008.

The growth concerns have fund managers trimming expectations for corporate profits, as well, with a net 20% of respondents seeing a slowdown for next year. In fact, a net 35% don't expect corporate profits to rise more than 10% next year, compared to the same amount that were predicting 2019 improvement when polled in February.

Yesterday's earnings slate, however, added strength to the U.S. dollar index, which tracks the greenback against a basket of six global currencies, lifting it 0.13% to 95.17 as benchmark 10-year U.S. Treasury yields edged 1 basis point half a basis point lower to 3.163%.

Global oil prices were also active, rising for the fourth consecutive session on the back of both the bullish U.S. market sentiment and data showing domestic crude and gasoline stocks fell by 2.1 million and 3.4 million barrels respectively last week, but pared gains amid concerns linked to the current tensions in Saudi Arabia following the disappearance of prominent journalist Jamal Khashoggi.

Brent crude contracts for December delivery, the global benchmark, were seen 26 cents lower from their Tuesday close in New York and changing hands at $81.15 per barrel while WTI contracts for November delivery, which are more tightly liked to U.S gas prices, were seen 38 cents lower at $71.54 per barrel.