US stock futures rose fractionally on Friday as oil prices fell and tech stocks rebounded.
Futures on the Dow Jones Industrial Average (YM=F) edged higher by 0.2%, while those on the S&P 500 (ES=F) rose 0.4%. Contracts for the Nasdaq-100 (NQ=F) gained 0.8% after stocks lost ground on Thursday.
Delta Air Lines (DAL) stock slipped after the airline reported third quarter earnings that missed the mark, as higher fuel prices outweighed strength in its premium business. Delta’s report also clears the way for the unofficial start of earnings season next Tuesday when the major Wall Street banks deliver results.
Tech stocks recovered after an AI scare on Thursday, when the Financial Times reported that OpenAI’s annualized revenue topped out at $50 billion, $20 billion short of estimates. Bloomberg later reported that OpenAI expects to reach or exceed $70 billion in annualized revenue by the end of the year, helping quell worries that the AI boom is running out of steam.
Falling oil prices also boosted stocks, as Brent crude oil futures (BZ=F), the international benchmark, declined to $102 per barrel.
We’ll see how much consumers felt the volatility in oil markets this month when the University of Michigan’s latest consumer sentiment survey results are released, providing a gauge of consumer confidence.
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Delta reports Q3 earnings miss, cuts guidance as fuel costs surge 62% from year ago
Yahoo Finance’s Pras Subramanian reports:
Delta Air Lines (DAL) reported third quarter results on Friday morning that missed the mark, as strength from Delta’s premium business could not blunt the effects of higher fuel prices. Delta subsequently cut its guidance, noting that its total fuel bill for the year would increase by a whopping $6 billion.
For the quarter, Delta reported Q3 adjusted revenue of $17.58 billion, slightly below analyst estimates of $17.76 billion per Bloomberg, up 15.7% from a year ago. Delta posted adjusted earnings per share (EPS) of $1.72 vs. $1.82 estimated, on adjusted net income of $1.134 vs. $1.23 billion expected.
Delta said its Q3 performance was hit by $500 million in higher fuel costs than the guidance it issued in July. Delta’s total fuel bill for the quarter hit $4.1 billion, up 62% from a year ago, as the US-Israeli war with Iran rocked the global oil market.
History says midterms could hand the S&P 500 a year-end rally
Stocks may be wobbling near record highs, but history suggests the midterm elections could pave the way for the S&P 500 (^GSPC) to rally into year-end.
Deutsche Bank’s Jim Reid pointed out that “we’ve now entered what has historically been a much stronger seasonal period, which is worth bearing in mind as nervousness remains high in markets.”
The firm’s research shows that the S&P 500 has risen in 21 of the last 23 midterm election cycles, from one month before the election to two months after.
“With the midterms now less than a month away, we entered that sweet spot this week,” wrote the strategist.
Source: Bloomberg Finance LP, Deutsche Bank Asset Allocation
Apple is the ‘toll collector on the consumer AI highway,’ Dan Ives says
Yahoo Finance’s Ethan Wolff-Mann writes in today’s Morning Brief newsletter:
Apple (AAPL) has positioned itself many times between the consumer and what they want, with great success.
The iTunes store. The App store. As Michael Gambon said in “Layer Cake” — a quote I have written about before and will many times again — “The art of good business is being a good middleman,” and Apple understands this as well as anyone.
But Apple’s ability to execute this strategy is thanks to its access to that middle ground: Controlling and supplying the world’s most popular devices, like the iPhone and iPad, makes this possible.
Yorkville Ives’s Dan Ives said this sums up his bullish case for the slick hardware king, the sometimes-most-valuable company, still flying high without being directly involved in frontier AI.
“In our view, Apple will be the toll collector on the consumer AI highway,” Ives wrote in a note to clients on Thursday. “While the last few years Apple has struggled with its AI strategy and went through many twists and turns, now finally Ternus and Cupertino have a horse in the race with an AI vision that will build over the coming years into a formidable piece of the Apple strategy.”
Economic data: U. Mich. sentiment, October preliminary reading (48 expected, 48.1 prior); U. Mich. current conditions, October preliminary reading (50.9 prior); U. Mich. current expectations, October preliminary reading (46.3 prior); U. Mich. 1-year inflation, October preliminary reading (+4.6% prior); U. Mich. 5-10 year inflation, October preliminary reading (+3.4% prior)
Tech stocks struggle on AI spending worries, elevated yields
Reuters reports:
Asian stocks slipped on Friday and were poised for a second straight weekly drop as investors fretted about elevated energy prices, bond market ructions and the huge sums needed to fund AI investment.
Brent crude futures were at $103.70 per barrel in Asian hours after surging more than 4% in the previous session on concerns over the war in the Middle East that has fanned inflation worries and led to higher rates across the globe.
President Donald Trump said on Thursday that the US will not launch an attack on Iran before November’s US midterm elections, although traders remained sceptical of any progress being made to end the war.
“The big question for markets is whether Trump sticks to his word if Iranian attacks intensify,” said Nick Twidale, chief market strategist at ATFX Global.
“Any indication that the White House is reconsidering military action could see oil prices spike sharply higher, particularly with tanker traffic through the Strait of Hormuz already under significant pressure.”
