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Tesla Falls, Philly Fed, Philip Morris - What's Moving Markets

Economy Oct 20, 2022 22:20
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By Geoffrey Smith 

Investing.com -- Tesla is set to open lower after admitting it probably won't reach its delivery targets this year. The U.S. will release the Philly Fed manufacturing survey as well as data on jobless claims and existing home sales, while no fewer than three Federal Reserve governors speak in the afternoon. Bond weakness continues to weigh on stocks, despite more decent earnings reports late on Wednesday. The U.K. descends into political farce, taking its bond market with it, and oil pushes higher as U.S. stockpiles record a surprise drop. Here's what you need to know in financial markets on Thursday, 20th October.

1. Tesla set to fall after cutting delivery target

Tesla (NASDAQ:TSLA) is set to open down nearly 6% after the electric car maker cut its delivery forecast for the year, unable to shake off the effects of surging input costs and scaling problems at its factories in Texas and Germany.

The outlook overshadowed a sharp rebound in profit to $3.2 billion in the third quarter, made possible by the willingness of its customers to absorb those higher costs. It also overshadowed a hint from CEO Elon Musk that the company may buy back up to $10 billion of stock next year.

Tesla stock hit a 16-month low last week, due both to broader market weakness and more specific concerns that Musk may be forced to sell more of his holding to finance the acquisition of Twitter (NYSE:TWTR).

2. Jobless claims, existing home sales, Philly Fed

There's a barrage of economic data from the U.S. to digest, with weekly jobless claims and the Philadelphia Fed's business survey at 08:30 ET (12:30 ET), followed by existing home sales numbers for September at 10:00 ET.

The Philly Fed will likely be the only one of these capable of generating a surprise. Home sales are already set firmly in a downward trend due to higher selling prices and mortgage costs, while jobless claims have failed to react much to signs of a slowdown in pockets of the economy.

A number of Federal Reserve officials will all speak after the data, with Philadelphia's Patrick Harker at 12:00 ET, followed by Governors Philip Jefferson, Lisa Cook, and Michelle Bowman in the course of the afternoon.

3. Stocks set to open lower on bond weakness; PM increases offer for Swedish Match

U.S. stock markets are set to extend Wednesday's losses at the open, with the fresh selloff in the bond market undoing much of the boost to sentiment from an earnings season that has, so far, turned out better than feared.

The yield on the 10-Year benchmark Treasury bond hit its highest since before the 2008 financial crisis on Wednesday and has continued to inch higher overnight, trading up 2 basis points at 4.15%.

By 06:15 ET, Dow Jones futures were flat, while S&P 500 futures were down 0.3%, and Nasdaq 100 futures – typically more sensitive to bond market movements - were down 0.6%.

Stocks in focus Thursday include AT&T (NYSE:T), after another quarterly gain in mobile subscribers, and Philip Morris (NYSE:PM), which has increased its offer for Swedish Match and bought the U.S. rights for IQOS heated tobacco products from Altria (NYSE:MO). ADRs in European telecom networks companies Ericsson (NASDAQ:ERIC) and Nokia (NYSE:NOK) have also grabbed headlines for all the wrong reasons, posting weak quarterly updates.

4. U.K. political chaos keeps Gilts under pressure

The chaos in U.K. politics continued, pushing the pound and U.K. government bonds lower. The move was amplified by a Bloomberg report suggesting that the cost of indemnifying the Bank of England for losses on its portfolio of Gilts is set to surge as the Bank begins its ‘quantitative tightening’.

The 10 year Gilt yield rose above 4% again, before retracing after banks showed only low interest in the Bank's repo operation, intended as a backstop to fragile market confidence.

Late on Wednesday, the government had lost another senior minister, Home Secretary Suella Braverman – an immigration hardliner - resigning in an apparent attempt to force the resignation of Prime Minister Liz Truss, as divisions between Conservative Party lawmakers create an increasing sense of paralysis in the government.

5. Oil pushes higher after U.S. stockpiles fall

Crude oil prices pushed higher overnight, still supported by the surprise drop in U.S. crude inventories last week that was confirmed on Wednesday by the Energy Information Administration. Doubts about the ability of further releases from the U.S. Strategic Petroleum Reserve to alter underlying market dynamics have also quickly lent support to prices.

By 06:35 ET, U.S. crude prices were up 1.9% at $86.12 a barrel, while Brent futures were up 1.5% at $93.81 a barrel.

In Europe, the cost of the spiraling energy crisis was again apparent in reports that gas importer Uniper (ETR:UN01) may need another 40 billion euros ($39 billion) in support from the German government, while German producer price inflation hit nearly 50% on the year, mainly due to a 250% increase in gas and electricity prices.

Tesla Falls, Philly Fed, Philip Morris - What's Moving Markets
 

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