US open: Wall Street opens higher despite a sharp slowdown in Q3 GDP

US futures

Dow futures +0.23% at 35580

S&P futures +0.31% at 4566

Nasdaq futures +0.54% at 15680

In Europe

FTSE -0.2% at 7233

Dax -0.25% at 15657

Euro Stoxx +0.19% at 4227

 

Manufacturers earnings reflect supply bottleneck, except Ford

US stocks are set to open higher on Thursday as investors weighed up more corporate earnings against the latest growth data.

On the earnings from Ford trades 10% higher pre-market after an earnings beat and raising its guidance for the year. The car maker actually attributed its stronger Q3 results to increased availability of semiconductor chips. This update is in stark contrast to other manufacturers earlier in the week. General Motors for example saw a 40% drop in profits owing to supply chain bottlenecks and chip shortages.

On the data front, economic growth slowed significantly in the third quarter. The reopening boom has been dampened by supply chain issues, labour shortages and rising energy prices in the July – September period. The Q3 GDP came in at 2% QoQ, down sharply from the 6.7% in the second quarter and well short of estimates of 2.7%.

On a more upbeat note the labour market improved again with jobless claims dropping to a fresh post pandemic low of 281k, down from 290k the previous week.

The mixed data plus weaker energy prices have pulled Dow futures off overnight highs, although they remain in positive territory. The tech heavy Nasdaq look set to outperform. Earnings season so far has been a tale of 2 sectors. Whilst tech continue to power higher on strong earnings, manufacturers are likely to miss forecasts, and lower guidance reflecting the supply chain issues.

Where next for the Nasdaq?

The Nasdaq continues to trade above the rising trendline with the RSI supporting further gains. Bulls are looking for a break above 15700 for fresh all time highs. Support can be seen at 15525, 15230 the 50 sma. A move below 15000 100 sma could see sellers gain traction.

FX – USD tip toes higher

The US Dollar has dropped sharply lower after weaker than forecast Q3 GDP. Sell off suggests that investors expect the Fed to hold off on rate hikes.

EUR/USD trades mildly higher after the ECB, as expected, kept monetary policy on hold. All eyes are on the ECB press conference where Christine Lagarde is expected to comment on bond buying as inflation sits at a 13 year high.

Oil extends losses on Iran talks, rising inventories

Oil prices are heading extending losses and hit a two week low after Iran announced that talks regarding its nuclear programmme would resume by the end of November and after US crude inventories by much more than expected.

A deal between Iran and the West could pave the way for the removal of oil sanctions imposed by Trump. This isn’t the first time that talks between the West and Iran have caused a sell off in the oil markets. Even if talks went well, it could be a long time until before Iranian oil reaches the markets again. Investors are using this as a good excuse to book profits after an incredible rally in oil prices.

Separately crude oil stocks rose by 4.3 million more than double the 1.9 million barrels forecast. Meanwhile gasoline inventories fell to their lowest in almost three years.

WTI crude trades -2.18% at $80.60

Brent trades -1.92% at $82.31

 

Looking ahead

14:00 US Pending home sales