Futures Drop as WeWork Files for Bankruptcy

U.S. stock futures saw a decline as traders evaluated the sustainability of a recent rally on Wall Street. WeWork has filed for bankruptcy amid a decline in demand for office space following the pandemic, while UBS reported its first quarterly loss since 2017 due to costs associated with its merger with Credit Suisse.

1. Futures Decline

U.S. stock futures fell on Tuesday, suggesting a retreat from recent gains as investors considered the strength of the ongoing rally. By 04:58 ET, the Dow Jones Industrial Average futures were down by 88 points (0.3%), S&P 500 futures lost 11 points (0.3%), and Nasdaq futures slid by 32 points (0.2%).

The major indices on Wall Street had closed the previous session positively, with both the benchmark S&P 500 and the Dow recording their first six-day winning streak since summer. Meanwhile, the tech-heavy Nasdaq saw its seventh consecutive increase.

After concluding a strong week, markets opened on Monday with optimism surrounding potential interest rate reductions by the Federal Reserve. However, uncertainty remains regarding growth and inflation, complicating the assessment of the central bank’s future policy decisions.

2. WeWork Files for Bankruptcy

WeWork has submitted a bankruptcy filing in New Jersey as the flexible co-working space provider, founded by Adam Neumann and backed by SoftBank, contends with decreased office occupancy and costly leases following the pandemic.

In a statement, WeWork indicated it would reorganize its operations to bolster its finances, stating it has stakeholder support to significantly reduce its existing debt. In August, WeWork warned that its $2.9 billion in net long-term debt and over $13 billion in long-term leases raised "substantial doubt" about its ability to continue operations.

The company clarified that its locations outside the U.S. and Canada, along with its global franchisees, would remain unaffected by the bankruptcy proceedings. Once viewed as a pioneering entity in the office space sector, WeWork’s occupancy rates have fallen short of expectations, and its market capitalization has plummeted to around $40 million, down from a valuation of $47 billion in 2019.

3. UBS Reports Quarterly Loss Due to Credit Suisse Integration Costs

UBS reported a larger-than-expected loss of $785 million for the third quarter, as the Swiss lender faced expenses linked to the integration of Credit Suisse. This merger, overseen by the Swiss government to prevent a Credit Suisse collapse, marks the first partnership of two systemically important banks.

UBS CEO Sergio Ermotti emphasized the bank’s swift incorporation of Credit Suisse, noting "strong inflows" in the wealth management division, which gained $22 billion in new client investments.

On the earnings front, Uber and Occidental Petroleum are also expected to report their latest quarterly results on Tuesday.

4. Chinese Imports Show Growth

China’s imports unexpectedly rose in October, sparking cautious optimism for a recovery in domestic demand. Imports increased by 3%, surpassing expectations of a 4.8% decline, and improving from a 6.2% drop in September. This uptick suggests potential benefits from recent support measures from Beijing. However, challenges remain due to an ongoing real estate crisis and soft global economic conditions.

In contrast, Chinese exports fell by 6.4% year-on-year in October, exceeding expectations for a smaller decline and worsening from the previous month’s 6.2% drop. Recent business activity data indicated that local manufacturers face declining overseas demand, affected by high interest rates and persistent inflation abroad.

5. Saudi Aramco Reports Decline in Profits

Saudi Aramco’s net income decreased by 23% in the third quarter, reflecting a downturn in oil prices and volumes, although some losses were mitigated by lower production royalties. Net profit for the three months ending September 30 was $32.6 billion, slightly above the $31.8 billion anticipated by analysts.

These results echo similar declines seen at other energy companies like Exxon Mobil and Chevron. Concerns over a sluggish global economy have impacted crude prices this year.

Oil prices dropped on Tuesday, influenced by mixed trade data from China, which has raised worries about demand from the world’s largest crude importer. By 04:58 ET, West Texas Intermediate futures were down 2.0% at $79.20 a barrel, while Brent crude fell 1.9% to $83.53 per barrel, amid growing belief that recent geopolitical tensions will not disrupt supply.