Skip to main content

The Friday Market Minute

  • Global stocks extend declines, setting up Wall Street for another rough ride, after disappointing third quarter earnings from Amazon and Alphabet after the close of trading Thursday.
  • Amazon forecasts the weakest revenue growth in two years, while Alphabet's ad revenue slows, taking the shine off two key FAANG stocks amid a solid earnings seasons characterized by weaker-than-expected outlooks.
  • Asia stocks slide to a 20-month low, led by a 1.6% decline in Korea, while European shares slump to the lowest in 2 years amid increasing concern over growth and trade.
  • Futures indicate a 265-point opening bell decline for the Dow, with interest rate traders focused on the first reading of third quarter GDP for any suggestion that the Fed's rate path will change in the coming months. 

Market Snapshot

U.S. stocks are set for another volatile session Friday, following heaving selling in Europe and extended declines in Asia triggered by disappointing earnings outlooks from some of the world's biggest companies amid increasing questions over the fate of the now-fragile bull market.

Last night's after-the-bell earnings slate, which included third quarter updates from tech giants Amazon (AMZN) - Get, Inc. Report and Google parent Alphabet (GOOGL) - Get Alphabet Inc. Class A Report , looks to have undercut investor sentiment in markets around the world as growth projections slow in the face of escalating trade disputes, rising interest rates and a stronger U.S. dollar. 

Asia stocks sank to the lowest level in 20 months in overnight trading, a sharp contrast to the 400 point gain booked for the Dow Jones Industrial Average I:DJI prior to the Amazon and Alphabet earnings, led by sharp declines for the Korean KOSPI, which fell deeper into bear market territory with a 1.6% decline. Japan's Nikkei 225 ended 0.78% lower at 21,184.60 points, capping a one-week slump of more than 6.6%

European stocks were also deeply in the red at the start of trading Friday, with bank and tech stocks pulling the Stoxx 600 1.16% to the downside to the lowest level in nearly two years. Benchmarks in Germany and France were similarly pressured, with the DAX, whose constituents are extremely sensitive to global trade, now quoted 2% lower on the day and 17.5% from it January peak.

U.S. stocks are looking at sharp opening bell declines, as well, with contracts tied to the Dow indicating a 300 point pullback while those linked to the broader S&P 500 undefined suggesting a 48 point slide for the broader benchmark. The tech-focused Nasdaq Composite I:IXIC is expected to open 245 points lower amid downside moves for Amazon and Alphabet at the opening bell.

Amazon, the world's biggest online retailer, posted a modestly weaker-than-expected topline of $56.5 billion last night, but forecast its slowest quarter revenue growth -- which will stretch across the holiday season -- in a least two years.

Amazon shares were marked 8.4% lower in pre-market trading Friday, indicating an opening bell price of $1,633.00 each, the lowest since June 1 but a move that would still leave the stock with a 45% year-to-date gain

Google parent Alphabet (GOOGL) - Get Alphabet Inc. Class A Report indicated the slowest ad revenue growth in two years, even as the topline rose 31% to $36.5 billion and the group beat the Street consensus with earnings per share of $13.06 and net income of $9.2 billion.

Alphabet shares were marked 5.2% lower in pre-market trading at $1,046.11 each, dragging FAANG peers Facebook Inc. (FB) - Get Facebook, Inc. Class A Report , which reports Tuesday, 3.13% lower to $144.23 and Apple (AAPL) - Get Apple Inc. (AAPL) Report , which updates on November 1, 1.6% lower at $216.30.

TheStreet Recommends

Colgate-Palmolive (CL) - Get Colgate-Palmolive Company Report  shares were marked 3.65% lower in pre-market trading following the results, indicating an opening bell price of $61.49, after it posted weaker-than-expected third quarter sales as international activity, especially in Latin America, slowed thanks in part to rising prices and a stronger U.S. dollar.

The forward-looking focus for investors is key to understanding the market's reaction to this earnings season, which has seen around 40% of the S&P 500 report quarterly updates that should provided overall blended earnings growth of around 23%, the third consecutive quarter with a 20-plus percent advance.

However, year-on-year comparison figures, as well as the fading impact of tax cuts and the Federal Reserve's determination to stick to its path of anticipated rate hikes, will likely result in a corporate earnings growth rate that is around half -- or perhaps less -- than the current 2018 pace.

With a light earnings calendar, investors will likely shift focus to Fed rate hikes based on the strength of the underlying economy in today's first estimate of third quarter GDP, which is expected to grow by 3.3% as the overall annual expansion extends into its ninth year.

Trade tensions with China, and its expected impact on the GDP reading, as well as disappointing new homes sales data and findings from the Federal Reserve's October Beige Book survey of domestic manufacturers, which showed increasing concern for rising raw materials costs and uncertainty over global trade prospects, are keeping investors cautious.

That, as well as the renewed criticism of Fed Chairman Jerome Powell by President Donald Trump, has trimmed rate hike expectations for December, which are now sitting at 70% according to the CMEGroup's FedWatch tool, and for March, where futures point to only a 41% chance of a rate move in the first quarter of next year.

U.S. Treasury bond yields have retreated as a result, with benchmark 10-year notes trading at 3.17% -- some 10 basis points lower from the start of the month -- while 2-year notes were quoted at 2.889%.

Global oil markets extended declines in the overnight equity selloff, with more questions over end demand, particularly from China, a buildup in U.S. crude inventories to 422 million barrels last week and comments from Saudi energy officials that suggest faster production rates all weighing on prices.

Brent crude contracts for December delivery, the global benchmark, were seen 81 cents lower from their Thursday close in New York and changing hands at $76.08 per barrel, extending a month-to-date decline past 9%.

WTI contracts for the same month, which are more tightly liked to U.S gas prices and have fallen more than 10% over the month of October, were seen 92 cents higher at $67.41 per barrel.

Make Money on Closed-End Mutual Funds. TheStreet's Robert Powell recently hosted an all-star panel of experts who explained everything you need to know on closed-end mutual funds, and often-overlooked investment class. Click here to register and watch for free.