U.S. stock futures fell as investors braced for a busy earnings season, seeking further clues about economic strength. Heightened tensions in the Middle East drove oil prices up, while gold reached a record high. Currently, S&P 500 futures are down 0.3%, the Nasdaq 100 futures declined 0.5%, and Dow futures slipped 0.2%. The yield on the 10-year U.S. Treasury climbed by 4 basis points, and the dollar saw a slight increase.
In Europe, the DAX index dropped 0.93%, the FTSE 100 decreased by 0.23%, the CAC 40 fell by 0.95%, and the Euro Stoxx 50 declined 0.93%. WTI crude increased by 2.27% to $70.25 per barrel, and Brent crude rose 1.93% to $74.47 per barrel.
Market influences are driven by changing investor perspectives on the health of major economies and geopolitical tensions in the Middle East. According to Bloomberg data, over one-fifth of S&P 500 companies are set to release earnings reports this week, including Tesla (TSLA, Financial), Boeing, General Motors, and Coca-Cola.
Europe's Stoxx 600 index dropped 0.5%, with Barclays strategists noting the lack of positive earnings surprises from European companies compared to previous years. Daniel Murray, CEO of EFG Asset Management, highlighted that optimism about a U.S. economic soft landing contrasts with Europe's more fragile macroeconomic environment, affecting confidence in European stocks.
Goldman Sachs strategists expressed doubts about U.S. stocks maintaining their above-average performance from the past decade, as investors look to bonds for better returns. Strategists like David Kostin anticipated that the S&P 500's annual nominal total return could slightly exceed 3% over the next ten years, compared to 13% in the past decade, with a long-term average of 11%. They also estimated that the index's returns have a 72% chance of lagging U.S. Treasuries and a 33% chance of falling behind inflation by the end of 2034.
T. Rowe Price noted concerns about rising inflation expectations and U.S. fiscal spending, predicting the benchmark U.S. Treasury yield could soon hit a critical level. Arif Husain, CIO of Fixed Income at the firm, suggested that the 10-year U.S. Treasury yield may reach 5% within six months, especially under scenarios of shallow Federal Reserve rate cuts.
Key stocks in focus include Spirit Airlines, which surged nearly 64% after announcing an agreement with US Bank National Association to extend the 2025 notes deadline to December 23, aiding its debt refinancing efforts. Tesla (TSLA, Financial) shares fell 1.3% in pre-market trading ahead of its third-quarter earnings release. UPS shares slipped 1.7% pre-market following a Barclays rating downgrade.
Chinese stocks mostly declined, with Li Auto falling over 2%, Alibaba down nearly 2%, Futu Holdings slipping close to 2%, and KE Holdings dropping over 1%. NetEase fell more than 2.3% pre-market, with expectations of a disappointing third-quarter performance. Meanwhile, Miniso gained 1% pre-market as its "TOP TOY" brand opened its first store in Thailand.
