Morning in New York: Washington stimulates rally in oil

Daily review and forecast of events on the U.S. stock market from Mikhail Denislamov, Deputy Director of Freedom Capital Markets Research.

In the center of investors' attention was the news about tougher restrictions against Russia. On the eve of the White House announced the introduction of direct sanctions against its largest oil companies - Rosneft and LUKOIL - in order to put pressure on the Kremlin to make progress in resolving the conflict in Ukraine. Oil prices reacted to the news with a jump of almost 3%, which could trigger an acceleration of inflation in the States.

Against this background, the macro data will be assessed through the prism of the influence of the current situation on the Fed's decisions. FRB Kansas on Thursday will publish the index of business activity in industry for October. In September, this index rose to 4 points, and for the traders it will be important to continue its positive dynamics.

In addition, the market continues to assess the risks associated with the possible introduction of new restrictions on software exports to China, which puts pressure on the technology sector.

The ongoing reporting season remains in the focus of stock exchange players. Freeport-McMoRan (FCX), T-Mobile US (TMUS), Honeywell (HON), Union Pacific (UNP), American Airlines (AAL), Blackstone (BX) and Roper Technologies (ROP) will report quarterly results before the opening of trading. Intel (INTC), Newmont (NEM), Ford (F), Norfolk Southern (NSC), Baker Hughes (BKR), Deckers Brands (DECK) and Digital Realty (DLR) will report after the end of the main session.

Futures on US indices show moderately positive dynamics. We assess the balance of risks for the upcoming session as neutral with average volatility. We focus on the S&P 500 movement in the range of 6650-6740 points (from -0.7% to +0.6% of the previous session closing level).

- Shares of Tesla (TSLA) are losing about 3.5% following the release of a quarterly report that disappointed investors. Despite record revenue of $28.1 billion (+12% YoY) that beat average expectations, adjusted net income fell 29% YoY to $1.8 billion. Three factors put pressure on the company's profitability at once: a roughly $400 million increase in costs associated with import tariffs; a sharp rise in AI R&D costs; and a 44% drop in regulatory revenue. The automaker's CFO warned that spending on AI initiatives will continue to rise, creating further uncertainty about the margins of the business.

- Medpace (MEDP) shares soared 18.5% in after-hours trading on October 22. The company reported a 23.7% increase in revenue to $659.9 million for the third quarter, which beat consensus, and also reported a 47.9% increase in new orders, which was seen by the market as a strong signal of future growth.

- IBM (IBM) shares are down about 6%, although its quarterly revenue and earnings beat forecasts. Investors were disappointed by a slowdown in revenue growth in Red Hat's cloud (key to the company) division from 16% to 14%, which was seen as a negative signal amid high expectations related to the AI boom.

- QuantumScape (QS) is adding about 10% on the back of the announcement that it has begun shipping samples of its advanced QSE-5 solid-state battery technology. This will be an important step towards commercialization of the technology. Although the company reported a $105.8 million loss for the last quarter and raised its guidance for the year, investors have focused on its operational success.

- Kinder Morgan (KMI) is down 0.5% after posting mixed results for the third quarter. The company's EBITDA grew by 6% YoY, which, combined with an increase in natural gas transportation volumes, indicates a favorable state of the core business. At the same time, investors were concerned about the decline in output of oil products (-1% YoY) and crude oil (-3% YoY), which indicates the remaining risks for these businesses.

Trades on October 22 on American stock exchanges ended with a decline. The S&P 500 lost 0.53%, the NASDAQ 100 dropped 0.99%, the Dow Jones fell 0.71%, and the Russell 2000 fell 1.45%. Among the "Magnificent Seven" stocks, Apple (AAPL: -1.64%), Amazon (AMZN: -1.84%) and Tesla (TSLA: -0.82%) posted the most notable correction. The market was pressured by disappointing corporate reports and renewed fears of an escalating trade conflict with China. Energy companies (XLE: +1.28%) were the leaders of growth. The industrial sector (XLI: -1.3%) was the outsider.

The main driver of the decline was the news of the White House's plans to restrict exports to China of a range of goods manufactured using US software, including laptops and aircraft engines. This news reinforced pessimistic expectations from the upcoming meeting between Donald Trump and Xi Jinping at the APEC forum.

Adding to the negativity was the Architectural Billings Index, which fell to 43.3 in September from August's 47.2 points. This leading indicator indicates the upcoming deterioration of the situation in commercial construction and adds arguments in favor of further economic slowdown.

As for the shutdown, market participants are laying expectations for its continuation until at least November.

The correction in prices for precious metals has slowed down. Gold, which lost almost 6% in trading results on October 21, declined by another 1.1% during the main session the day before, but after the close it turned to growth.

- The rally in Vicor shares (VICR: +30.3%) was caused by the publication of the quarterly report, in which the company's earnings per share (EPS) turned out to be 3.7 times higher than the consensus and amounted to $0.63. Additional support was provided by management's comments on record revenues from intellectual property licensing and plans to double them in the next two years.

- Strong results across all key metrics and an increase in full-year revenue and earnings guidance boosted Boston Scientific (BSX: +4%). The issuer's revenue climbed 20.3% YoY to $5.07 bln, while adjusted EPS rose to $0.75 from $0.63 a quarter earlier. Investors were particularly encouraged by organic growth of 15.3% YoY.

- AT&T securities (T: -1.9%) came under pressure despite active base expansion in the reporting quarter. The company attracted 405,000 new mobile subscribers and 270,000 Internet Air users, but investors were disappointed by the decline in average revenue per subscriber.

- Shares of Hilton Worldwide (HLT: +3.4%) rose following the release of its third quarter report. The company reported strong revenue and earnings results and beat EPS estimates for the 15th consecutive quarter. Although Hilton management lowered its 2025 revenue growth guideline by a number from 2% to 1%, investors focused on the successful current performance and on raising its full-year net income per share guidance.

This article was AI-translated and verified by a human editor