MARKET WRAPS

Watch For:

Trade report for September; Preliminary Productivity & Costs for 3Q; Weekly Jobless Claims; ISM Report on Business Services PMI for October; Canada Trade report for September; Starbucks earnings

Opening Call:

Today's Headlines:

-China Caixin Services PMI Fell Further in October

-Canada Orders Chinese Companies to Divest From Miners

-Musk's Proposed Twitter Changes Revive Debate on How to Quash Spam

Follow WSJ markets coverage here.

Stock futures struggled to make headway on Thursday as traders absorbed the fallout from the latest Federal Reserve interest-rate decision.

Robert Bayston, head of U.S. government and mortgage portfolios at Insight Investment, said further bouts of market volatility were highly likely as the Fed continued to manage market expectations while making clear the end of its hiking cycle is not yet in sight.

"The challenge for the Fed will be to communicate to the market its desire to keep monetary policy and financial conditions tight over the medium term. It may do this by continuing to deploy hawkish rhetoric," said Bayston.

Julian Emanuel, senior strategist at Evercore ISI, reckons that Powell's "hawkish message underpins volatility into and beyond the 11/8 Election. A retest of the October lows, particularly [by the] growth centric Nasdaq 100, becomes base case."

Read Barrons.com: Shrinking Profit Margins: The Market's New Big Problem

Stocks to Watch:

UBS likes packaging company Amcor's leverage to relatively defensive consumer end markets, among other factors, but it's alert to stiffening headwinds.

UBS said Amcor has a proven track record of managing inflationary cost pressures, while its 4% dividend yield is attractive.

"However, we see a moderating EPS growth outlook and more uncertain consumer volumes as factors that may dampen investor interest. The stock is also now trading at a 27% premium to global packaging peers." That compares to an average enterprise value-to-Ebitda multiple of 15% historically.

UBS retains a neutral call on Amcor's stock.

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Steel Dynamics said it will build its new aluminum rolling mill in Columbus, Miss., where the company already operates a steel mill.

The aluminum plant, which is expected to employ about 700 people and begin operations in 2025, will melt aluminum scrap and roll it into new aluminum for beverage cans, automotive parts and other industrial uses. The company said it selected Columbus because of its access to water, rail and highway transportation and adequate supplies of energy.

Steel Dynamics also said the close proximity of its Flat Roll Steel Division will provide some cost savings for the new plant.

"A significant number of our flat-rolled carbon steel customers are also consumers and processors of aluminum flat rolled products," CEO Mark Millett said.

Early Movers:

Qualcomm again slashed its forecast for smartphone shipments and gave a gloomier than expected sales outlook. Its shares fell 7.1% premarket.

eBay shares jumped 7.4% off hours after it reported better-than-expected earnings and gave an outlook for the holiday period in line with analysts' forecasts.

Roku said it expected revenue from advertising and sales of streaming hardware to fall in the fourth quarter, sending its shares down 18% in after-hours trading.

Etsy shares jumped 11% premarket after it reported that its revenue increased despite a decline in sales on its platform following a fee increase earlier this year.

Forex:

The dollar hit a two-week high against a basket of currencies and the euro after the Fed policy decision and ING said the currency should rise further particularly against riskier currencies.

"Expect Fed policy to prove a bullish undercurrent to the dollar and an even more inverted U.S. yield curve to weigh in particular on the high beta activity and commodity currencies, such as the Australian and New Zealand dollars, Norway's krone and Sweden's krona."

Bonds:

A closely watched plot of bond yields that compares 3-month Treasury bills and 10-year Treasury notes has now "inverted" for the first in this cycle, meaning investors can earn more on securities that mature in only a few months, rather than those coming due in a decade.

Bond investors have grown skittish about investing in the short term, given the challenges of the Fed as it works to restrict the economy, tame inflation perched near a 40-year high and avoid throwing the economy into the ditch.

Those concerns became more evident months ago when the 2-year Treasury yield eclipsed the rate of bonds maturing in 10-years, flashing an earlier recession signal.

"But the 3M-10Y [inversion] is important because it has historically been more accurate at predicting recessions," TS Lombard said. "Both the market and consensus say in the next 12 months: the recession countdown has begun."

Read more here.

Energy:

Oil prices were down more than 1% in early European trade after Powell's signal that the ultimate level for rates would need to be higher for longer to bring down inflation, hit expectations for oil demand and boosted the dollar.

Other Insight:

Even with European gas stockpiles close to full, the continent is short of 270 terawatts an hour-worth of gas to get through the winter, assuming consumption levels are in line with historical averages, SEB said.

Cold weather could worsen the situation. A winter akin to the 2017-18 cold spell which hit Northern Europe would boost demand for gas and put the energy deficit at 390 TWh, SEB said.

Early fall weather in Europe so far has been mild, however. "Every warmer-than-normal day with reduced gas consumption and delayed start of inventory withdrawal, is easing the pain," SEB added.

Metals:

Base metals and gold fell sharply in Europe after the Fed indicated more interest-rate hikes would follow Wednesday's 75-basis-point increase, boosting the dollar.

SPI Asset Management said there was "little to get excited about deploying risk here as market participants remain focused on inflation prints, which will ultimately matter most regarding the Fed outlook."


TODAY'S TOP HEADLINES


Elon Musk's Proposed Twitter Changes Revive Debate on How to Quash Spam

Elon Musk's proposal for a Twitter Inc. subscription program has reignited the debate over the issue of spam and fake accounts that was at the center of the billionaire's effort to get out of buying the social-media company.

In a series of tweets this week, Mr. Musk said the program would give subscribers priority in replies, mentions and search, among other features. Current verified users who want to retain that status would need to subscribe to the program within a 90-day period, according to a version of the proposal described in internal company correspondence viewed by The Wall Street Journal.


Carl Icahn Has More Than 8% Stake in Beverage-Can Maker Crown Holdings

Carl Icahn has a sizable stake in Crown Holdings Inc. and believes the beverage-can maker should shed noncore units and buy back more stock, according to people familiar with the matter.

The billionaire activist investor has a stake worth about $700 million, making him the company's second-largest holder, the people said.


Robinhood Cuts Losses After Transaction Revenue Drops

Net losses at Robinhood Markets Inc. fell in the third quarter after a steep drop in expenses helped offset declining revenue and lower user numbers.

The online broker reported third-quarter revenue of $361 million, a year-over-year decrease of 1% and a seventh consecutive quarterly drop. Rising interest rates helped lift quarterly net interest revenue to $128 million, more than doubling from the same period a year ago. Chief Financial Officer Jason Warnick said the company has about $17 billion in assets that generate interest revenue.


Shrinking Profit Margins: The Market's New Big Problem

Stocks are facing lots of headwinds these days. The dollar is strong, a thorn for those companies that import materials and those with customers overseas. Interest rates are rising, which means slower economic growth and higher interest expense. And cost inflation and parts shortages aren't going away soon.

But something else is going to matter much more to investors in the coming year: shrinking profit margins. The writing is on the wall, evident in this season's outlooks.


BNP Paribas Beat Expectations in 3Q After Riding Out Tough Investment Market

BNP Paribas SA said it beat expectations in its third quarter as its investment-banking division proved resilient amid strong client demand despite the market slump.

The French lender said Thursday that its net profit in the three months to the end of September rose to 2.76 billion euros ($2.71 billion) from EUR2.50 billion in the same period a year earlier.


Stellantis Backs Full-Year View After 3Q Revenue Rose

Stellantis NV on Thursday confirmed full-year targets after revenue increased on higher volumes and strong pricing in the third quarter.

The car maker reported revenue of 42.10 billion euros ($41.33 billion) for the three-month period, which compares with EUR32.55 billion the prior year.


BMW Backs Auto Margin Target for 2022 After 3Q Earnings Rose

BMW AG on Thursday confirmed the full-year margin target for its auto business and said earnings came in higher in the third quarter, helped in part by car pricing.

The German luxury car maker said quarterly aftertax profit rose to 3.18 billion euros ($3.12 billion) from EUR2.58 billion the same period a year earlier.


China Caixin Services PMI Fell Further in October

A private gauge of China's services-sector activity slipped further into contraction in October, reflecting the impact of stringent restrictions to curb Covid-19 outbreaks sweeping the country.

The Caixin services purchasing managers index dropped to 48.4 in October from 49.3 in September, Caixin Media Co. and S&P Global said Thursday. A reading below the 50 mark indicates activity contraction.


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11-03-22 0540ET