U.S. stock futures remained just above the flatline ahead of new quarterly earnings. Netflix shares fell by over 6% after hours on weaker-than-expected third-quarter operating margin at the streaming company. Tesla is also set to report its latest returns after the closing bell, and gold prices continued to slide further.
Stock futures steady ahead of earnings
U.S. stock futures were steady on Wednesday. Investors analyzed a wave of corporate earnings and the aftermath of a sharp drop in gold.
By 03:39 ET (07:39 GMT), the Dow futures contract was up by 38 points, or 0.1%, S&P 500 futures added 10 points, or 0.1%, and Nasdaq 100 futures were mostly unchanged.
Wall Street’s main averages ended mixed on Tuesday, with rising worries over high stock valuations and the questions it raises around a recent rally in equities loomed large.
Geopolitical uncertainty also drew a lot of attention. President Donald Trump suggested that a planned meeting with Chinese President Xi Jinping in South Korea later this month may not happen, dampening hopes for progress in trade talks between the US and China, the world’s two biggest economies.
However, Trump said that if the meeting took place, it would be “very successful.” He added that he expects to secure a “fantastic” and “fair” trade agreement with Xi.
At the same time, a possible summit between Trump and Russian President Vladimir Putin was postponed. Reports indicated that Moscow had no intention of ending the ongoing war in Ukraine.
Netflix margins pressured by Brazil tax battle
Netflix shares fell in after-hours trading, weighed down by a third-quarter operating margin from the streaming giant that came in slightly below Wall Street expectations.
The 28% margin was just short of forecasts, mostly affected by costs related to a dispute with tax authorities in Brazil. Without that expense, Netflix said its margin would have beat estimates.
The Brazilian issue is also expected to hit full-year margins. Netflix lowered its annual outlook for the figure to 29% from 30%.
Still, revenue and profit for the period grew. The company reported its best-ever quarter for advertising sales, along with higher membership and recent price increases.
Tesla to report
The company reported record third-quarter deliveries earlier this month, helped by a marketing and discounting campaign aimed at boosting sales ahead of the withdrawal of a $7,500 U.S. tax credit for buyers of electric vehicles. Investors are now concerned how Tesla’s performance might be affected following the expiration of the tax credits.
However, analysts at Vital Knowledge said, “earnings reports for this company are nearly irrelevant as the bulk of the narrative and equity value isn’t related to the core business of manufacturing and selling autos but instead hope and hype for products that won’t impact income statement in a material way for years to come.”
CEO Elon Musk and Tesla have long talked about the benefits of initiatives like robotaxis and full self-driving technology.
So far this year, Tesla’s stock price has risen by more than 16%.The board’s proposal of a huge new pay package for Musk, along with his additional share purchases, partly drove the gain.
Tesla stock slips 1% after earnings miss estimates but revenue jumps
Tesla stock was down more than 1% on Wednesday. The company’s third-quarter profit of $0.50 per share missed analyst expectations of $0.54.
The electric vehicle maker’s revenue increased to a record $28.10 billion versus estimates for $26.36 billion.
Tesla’s free cash flow totalled $3.99 billion, significantly ahead of the expected $1.25 billion. This figure represents the cash a company has on hand after covering all its operating expenses and capital expenditures.
Also on the earnings calendar, telecom giant AT&T, electric services company GE Vernova, and biotech firm Thermo Fisher are scheduled to report. Their results will be released before Wall Street’s opening bell.
Volatile gold prices
The precious metal dropped more than 5% on Tuesday. It was its sharpest single-day decline since 2020, marking a burst of intense bullion volatility.
Prices had hit record highs earlier this week, supported by geopolitical concerns and expectations of U.S. monetary easing.
Gold prices extended their decline on Wednesday after the worst intraday drop in more than 12 years. The fall temporarily paused one of this year’s hottest rallies.
Gold falls as dollar strengthens
Futures for the precious metal fell more than 0.4%, hovering near $4,090 per troy ounce. The drop followed a 5.5% decline in the prior session as investors locked in profits and the US dollar strengthened.
Before the sell-off, gold had climbed 65% year to date on strong global central bank demand and a rush by investors to the safe-haven metal as a hedge against the decline of fiat currencies – the so-called debasement trade. Wall Street strategists had warned of overbought conditions.
Attention was also turning to key U.S. inflation data due later this week, which could influence how the Federal Reserve approaches interest rates in the coming months. The release may also be one of the few updated official economic indicators the central bank receives before its next meeting on October 28-29, as an ongoing federal government shutdown has delayed several major data releases.
Ulrike Hoffmann-Burchardi, chief investment officer for the Americas region at UBS, wrote on Wednesday: “We have highlighted the potential for volatility given the scale and speed of the rally, but we believe precious metals should remain supported by a combination of macroeconomic, fundamental, and momentum-driven factors.”
Spot gold was down 2.1% at $4,039.48 per ounce as of 07:07 ET. U.S. gold futures fell 1.4% to $4,050.64/oz.
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