Futures Lower, Upcoming Bank Earnings, and Tesla’s Robotaxi Event – Market Movers Explained

US stock futures indicate a downward trend as the market anticipates significant earnings reports from major banks, including JPMorgan Chase and Wells Fargo. In addition, Tesla has revealed its highly anticipated robotaxi offering during an event in Los Angeles. Meanwhile, Warren Buffett’s Berkshire Hathaway has reduced its stake in Bank of America below a critical threshold.

1. Futures Decline

On Friday, US stock futures remained slightly negative as investors prepared for a series of earnings announcements from major Wall Street banks while also evaluating new inflation data. By 03:48 ET, Dow futures had dropped 46 points (0.1%), S&P 500 futures were down by 8 points (0.1%), and Nasdaq 100 futures fell by 37 points (0.2%). The previous trading session closed lower, driven by Labor Department reports that revealed higher-than-expected price growth in September, along with an uptick in first-time unemployment claims.

This comes as the Federal Reserve aims for a "soft landing" for the US economy, trying to manage inflation without triggering a steep downturn. Last month, the Fed made a notable 50 basis point cut in interest rates to support labor demand amid decreasing inflation pressures. Traders are currently pricing in an approximately 86% chance that the Fed will implement a more conventional 25-basis point reduction at their next meeting in November.

2. Bank Earnings on the Horizon

Investors are closely watching the upcoming earnings reports from JPMorgan Chase and Wells Fargo as they mark the start of the US banking sector’s earnings season. Analysts expect these banks to report decreased profits for the third quarter, largely due to potential declines in net interest income amid falling borrowing costs. Given recent interest rate hikes by the Fed to combat rising inflation, these forecasts have become crucial for investors, especially as a potential cycle of rate cuts may impact net interest income further.

Additionally, it is anticipated that these banks’ investment banking segments benefitted from increased debt issuance and initial public offerings, while heightened market volatility could bolster trading revenues. However, third-quarter revenues are generally slower compared to the preceding quarter.

3. Tesla Launches "Cybercab"

Shares of Tesla saw a minor dip in premarket trading following the unveiling of its awaited "Cybercab" robotaxi. CEO Elon Musk provided limited information about the technology during the launch event. The Cybercab, designed without a steering wheel or pedals and seating two passengers, is expected to begin production before 2027 with a price tag below $30,000. Musk acknowledged that the service must navigate numerous regulatory challenges.

Since announcing its "robotaxi day" in April, Tesla’s shares have rallied, with Musk projecting that the new offerings could elevate the company’s valuation to around $5 trillion from its current figure of just over $748 billion. Musk stated, “It’ll save lives,” asserting that autonomous vehicles will be significantly safer than human drivers. The event also showcased prototypes of a 20-person autonomous "Robovan" and an updated humanoid robot called "Optimus."

4. Berkshire Hathaway Lowers Bank of America Stake

Berkshire Hathaway, led by Warren Buffett, has sold a portion of its shares in Bank of America, reducing its stake to below 10%. The company sold 9.5 million shares valued at over $382 million, as disclosed in a recent regulatory filing. This reduction means Berkshire is no longer required to report stock transactions within two business days, affecting how quickly Bank of America investors will receive information on any further share sales.

5. Oil Prices Experience Volatility

Oil prices fluctuated on Friday but remained on track for a second consecutive weekly gain, as investors assessed the effects of hurricane damage in the US and ongoing tensions in the Middle East. By 03:47 ET, Brent crude had fallen by 1.1% to $78.57 per barrel, while US crude futures were down 1.1% at $75.05 per barrel, with both benchmarks anticipated to gain about 1% for the week.

In the US, Hurricane Milton caused extensive damage in Florida, leaving millions without power and potentially impacting fuel consumption in the largest oil producer and consumer globally. Additionally, traders were wary of a possible escalation in Middle Eastern conflicts, particularly regarding potential actions against Iran’s oil facilities.