Futures Drop, Bank Earnings on the Horizon, Tesla’s Robotaxi Event – Market Movers Update

US Stock Futures Dip Ahead of Major Bank Earnings and Tesla’s New Robotaxi Announcement

US stock futures are trending lower as the market anticipates significant earnings reports from major banks, including quarterly figures from JPMorgan Chase and Wells Fargo. Meanwhile, Tesla is set to unveil its long-awaited robotaxi offering at a highly anticipated event in Los Angeles, while Warren Buffett’s Berkshire Hathaway has reduced its stake in Bank of America below a critical threshold.

1. Futures Decline

US stock futures showed modest declines on Friday as investors geared up for the earnings reports from major Wall Street banks and reviewed the latest inflation data. By 03:48 ET, Dow futures were down by 46 points (0.1%), S&P 500 futures fell by 8 points (0.1%), and Nasdaq 100 futures decreased by 37 points (0.2%).

The previous trading session ended with losses after Labor Department data indicated higher-than-expected price growth in September, along with a rise in first-time unemployment claims, exceeding economists’ predictions.

This economic data comes as the Federal Reserve seeks to manage a "soft landing" for the US economy, aiming to control inflation without triggering a major downturn in the labor market. The Fed recently cut interest rates by 50 basis points to bolster labor demand amid declining inflationary pressures.

Following this data release, traders are pricing in an approximately 86% likelihood that the central bank will implement a standard 25-basis point cut in its next meeting scheduled for November, leaving a 14% chance for rates to remain unchanged between 4.75% and 5.00%.

2. Upcoming Bank Earnings

Investors are waiting for the earnings reports from JPMorgan Chase and Wells Fargo, which will kick off the latest earnings season for the US banking sector. Analysts expect a decrease in third-quarter profits for these banks, likely due to a potential decline in net interest income resulting from lower borrowing costs.

The banks’ forecasts will be under scrutiny, particularly as the Fed may be entering a period of policy easing after increasing interest rates in recent years to counteract inflation. Potential rate cuts could impact net interest income, although they may also promote increased borrowing and financial activity.

Meanwhile, analysts believe that investment banking operations for these firms may benefit from a rise in debt issuance and initial public offerings, with increased market volatility potentially boosting trading revenues, despite a general slowdown during the third quarter compared to the previous quarter.

3. Tesla Introduces "Cybercab"

Shares of Tesla experienced a slight dip in premarket trading after the company unveiled its much-anticipated "Cybercab" robotaxi, though analysts noted that CEO Elon Musk provided limited information on critical aspects of the technology.

The Cybercab, which will not have a steering wheel or pedals and seat two passengers, is anticipated to start production before 2027, with a target price of under $30,000. Musk highlighted the need for the service to navigate various regulatory challenges.

Despite the mixed reception, Tesla’s stock has surged since the announcement of "robotaxi day" in April, with Musk estimating the value of new offerings could elevate the company’s worth to $5 trillion, significantly higher than its current valuation.

Musk claimed these autonomous vehicles would be significantly safer than human drivers. Tesla also showcased a prototype of "the Robovan," which can accommodate up to 20 passengers, along with an updated model of its humanoid robot, known as “Optimus.” This shift towards artificial intelligence and self-driving technology coincides with Tesla’s challenges in maintaining sales in the face of rising competition and declining demand in key markets.

4. Berkshire Hathaway Slashes Stake in Bank of America

Warren Buffett’s Berkshire Hathaway has reduced its stake in Bank of America, now below 10%. The company sold approximately 9.5 million shares valued at just over $382 million this week, as per regulatory disclosures.

By reducing its stake below the 10% mark, Berkshire avoids certain disclosure requirements for stock trades, meaning stakeholders will have to rely on quarterly reports for any future sales information.

5. Oil Prices Experience Volatility

Oil prices fluctuated on Friday but are on track for their second consecutive weekly gain, as investors assess the repercussions of hurricane damage in the US and tensions in the Middle East.

As of 03:47 ET, the Brent crude contract was down 1.1% at $78.57 per barrel, while US crude futures (WTI) also fell 1.1% to $75.05 per barrel. Both benchmarks are expected to see weekly gains of around 1%.

In the US, Hurricane Milton wreaked havoc across Florida, disrupting power for millions and possibly impacting fuel consumption in the nation’s largest oil producer and consumer. Additionally, market participants are concerned about potential escalations in the Middle East conflict, particularly regarding Israel’s actions towards Iranian oil facilities.