Presidential Debate, Stimulus Blow; Tesla Strength - What's up in Markets

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Presidential Debate, Stimulus Blow; Tesla Strength - What's up in Markets

By Geoffrey Smith -- Donald Trump and Joe Biden square off in the final presidential debate, Tesla (NASDAQ: TSLA ) blows past expectations in the third quarter, Intel (NASDAQ: INTC ) results and weekly jobless claims are due, and Europe's pandemic numbers are getting worse and worse. Here's what you need to know in financial markets on Thursday, October 22nd.

1. Seconds out, final round

President Donald Trump takes on his Democratic Party rival Joe Biden in the final televised debate of the presidential election campaign, in what is being seen by many as the last opportunity for Trump to make up ground in the polls before November 3.

The debate comes a day after Trump’s Director of National Intelligence John Ratcliffe and FBI head Christopher Wray said that Iranian and Russian operatives had hacked the rolls of registered electors and were using the information to influence the election. While Ratcliffe said the Iranian effort was aimed at harming Trump’s campaign, reports indicate that the Iranian effort had concentrated on sending intimidatory emails to registered Democrats, telling them to “Vote for Trump or else”. The emails purported to be sent by the right-wing “Proud Boys” grouping.

The chances of U.S. lawmakers passing a package of stimulus measures before the election appear to have disappeared, with negotiators on both sides Wednesday acknowledging that a lack of scheduling opportunities and resistance in the GOP-controlled Senate make a vote before then unlikely.   

2. Tesla delivers record quarter

Tesla blew past expectations with a record quarterly profit in the three months through September, helped by lower production costs that allowed it to make an operating profit even without the support from nearly $400 million in emissions-related regulatory credits.

The numbers will allay some doubts about the underlying profitability of Tesla’s business model and will strengthen the chances of the stock being included in the S&P 500 .  

Speculation that thousands of passively-managed funds will be forced to buy the stock at that moment has been the driving force behind the stock’s four-fold rally this year. S&P inclusion still seems largely priced in, with the stock reacting with a comparatively restrained 4.8% rise in premarket.

3. Stocks set to open lower; jobless claims due

U.S. stock markets are set to open lower, extending Wednesday’s losses, on disappointment at the failure to cobble together a stimulus deal. Those fears could flare up again at 8:30 AM ET, when the weekly jobless claims are published. Analysts expect initial claims to edge down from last week's 898,000 to 860,000.

By 6:25 AM ET (1030 GMT), Dow futures were down 47 points, or 0.2%, while the S&P 500 Futures and NASDAQ Futures contracts were down in parallel.

The early earnings roster will be dominated by AT&T (NYSE: T ), which fell just short of consensus forecasts on earnings but topped expectations on revenue in the third quarter. Medical equipment group Danaher (NYSE: DHR ) may also garner some interest after an impressive beat on the bottom line. Coca-Cola (NYSE: KO ), Northrop Grumman (NYSE: NOC ), Kimberly-Clark (NYSE: KMB ) and Dow (NYSE: DOW ) are all due before the open, while Intel and Expedia (NASDAQ: EXPE ) top the billing after the close.

4. Europe's pandemic blues

Italy and Germany posted their biggest ever one-day numbers for new infections of Covid-19, increasing fears that Europe is inevitably heading again for the kind of lockdowns seen earlier in the year. The U.K. also posted a sharp rise in new infections.

The second wave of the pandemic is increasingly showing itself in European sentiment data: German consumer confidence fell in GfK’s monthly update, published earlier Monday, as did French business confidence.

European Central Bank officials, meanwhile, appear to be preparing the ground for an expansion of its bond-buying program, although most analysts see action at the December meeting more likely than the meeting in a week’s time.

Earnings updates from Europe overnight suggested that consumer groups across the spectrum are adjusting to life under Covid-19, with Unilever (NYSE: UL ), Hermes and Pernod Ricard (PA: PERP ) all posting decent rebounds in the third quarter. International Airlines Group (LON: ICAG ) however downgraded its guidance again, saying it now expects negative operating cash flow in the current quarter.

5. Oil stabilizes after gasoline stockpile shock

Crude oil prices stabilized at lower levels after a sharp drop on Wednesday in response to the Energy Information Administration’s report that U.S. gasoline stocks rose by nearly 2 million barrels last week, instead of falling, as had been expected.

The numbers stoked fears that spreading infections in the U.S. are finally having an impact on U.S. fuel demand, after appearing resilient over the last couple of weeks.

By 6:30 AM ET, U.S. crude futures were up 0.2% at $40.22 a barrel, while Brent futures were up in parallel at $41.22 a barrel.

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