US futures contracts sharply down after Amazon, Alphabet results overwhelm global markets

Friday's market minute

• Global equities continue their downtrend, resulting in a tough new day for Wall Street, following disappointing results from Amazon and Alphabet in the third quarter after markets closed on Thursday.
• Amazon expects the lowest revenue growth in two years, while Alphabet's advertising revenue slows, pushing two of FAANG's key actions back in a strong earnings season with weaker-than-expected prospects.
• Asian stocks fell to their lowest level in 20 months, driven by a 1.6% decline in Korea, while European equities fell to their lowest level in two years, amid growing concern for the economy. growth and trade.
• Commodity futures point to a 365-point dip in the Dow as interest rate traders focus on first-reading GDP in the third quarter to point to any suggestion that the Fed's rate path will change over the next few months.

Market overview

US equities to experience another volatile session on Friday, after strong sales gains in Europe and persistent declines in Asia, driven by disappointing earnings prospects of some of the world's largest companies as the fate of the bull market, which has become fragile , raises more and more concerns.

The list of profits after the evening of last night, which includes the third quarter updates released by the Amazon technology giants (AMZN) and Google Alphabet (GOOGL), appears to have undermined investor sentiment over the Global markets as growth expectations slow in the face of escalating trade disputes, rising interest rates and strengthening the US dollar.

Asian markets plunged to the lowest level in 20 months thanks to overnight trading, a sharp contrast to the 400-point gain for the Dow Jones Industrial Average Prior to Amazon and Alphabet, earnings were mainly due to sharp declines in the Korean KOSPI, which sank further into the bear market, down 1.6%. The Japanese Nikkei 225 finished with a decline of 0.78% to 21,184.60 points, limiting the fall of a week by more than 6.6%

European equities were also deeply in the red at the start of trading on Friday as banking and technology stocks dragged the Stoxx 600 down 1.5%, reaching its lowest level in almost two years. Reference indices in Germany and France have been subject to similar pressures. The DAX, whose components are extremely sensitive to global trade, is now down 2% that day and 17.5% since the peak reached in January.

US equities are also forecasting sharp declines, as Dow-linked contracts are down 320 points, while S & P 500 broadly suggesting a 56-point slide for the larger reference. The Nasdaq technology-focused composite should open 277 points less among the downward movements for Amazon and Alphabet at the opening bell.

Amazon, the world's largest online retailer, posted slightly lower than expected revenue of $ 56.5 billion last night, but expects its slowest revenue growth for the period which should extend over the holiday season, in at least two years.

Amazon shares recorded a 7.8% drop in pre-sell transactions on Friday, indicating an opening price of $ 1,642.48 each, the lowest since June 1st, but a decision that would still leave the title with a gain of 45% since the beginning of the year.

Alphabet also posted the lowest growth in advertising revenue in two years, while revenue grew 31% to $ 36.5 billion and the group beat the Street consensus with a profit per share of $ 13.06 and a net profit of $ 9.2 billion.

The Alphabet shares recorded a 5% drop in trading before the issue on the market, at $ 1,048.00 each, leading to the peers FAANG Facebook Inc. (FB), which publishes Tuesday a 3% drop to 146 , $ 35, and Apple (AAPL), updated November 1, 1.5% below $ 216.50.

Prospective investor attention is critical to understanding the market reaction to this earnings season, which saw about 40% of the S & P 500's quarterly updates report overall combined earnings growth of around 23%, the third consecutive quarter More than 20% in advance.

However, the comparative figures of one year on the other, as well as the mitigation of tax cuts and the determination of the Federal Reserve to stick to its increases in anticipated rates, will likely result in a growth rate of corporate profits of about half or more. perhaps less than the current pace of 2018.

With a loose schedule of results, investors are likely to focus on Fed rate hikes, based on the strength of the underlying economy in the first estimate of GDP in the third quarter, which is expected to rise by 3 percent. 3% while the overall annual expansion continues in its ninth year. .

Trade tensions with China and their expected impact on GDP, as well as disappointing data on new home sales and the findings of the October Federal Reserve survey of domestic manufacturers, which showed growing concern about rising raw material costs and uncertainties about world trade. prospects, keep investors cautious.

That, as well as renewed criticism by Fed President Jerome Powell by President Donald Trump, has reduced expectations of a rate hike for December, which now stands at 70% according to the FedWatch tool. CMEGroup group, and for March, where the 41% chance that rates change in the first quarter of next year.

As a result, US Treasury bond yields declined as the 10-year benchmark notes trade at 3.17% – about 10 basis points lower than at the beginning of the month – while the 2-year notes years were at 2,889%.

Global oil markets have prolonged the day-to-day sell-offs of equities, prompting more and more questions about final demand, particularly from China, with US crude inventories accumulating at 422 million barrels last week and comments from Saudi energy officials that higher production rates are weighing on prices.

The global benchmark for Brent crude contracts to be delivered in December was down 66 cents from Thursday's close in New York and $ 76.23 a barrel, down monthly of more than 9%.

WTI contracts for the same month, which are more closely tied to US gasoline prices and fell more than 10% in October, were up 66 cents to 67.67 dollars a barrel.