Netflix’s margin miss; Tesla to report; gold choppy - what’s moving markets

Investing.com - U.S. stock futures hover just above the flatline ahead of a fresh slate of quarterly earnings. Netflix shares drop by more than 6% in after-hours dealmaking, as traders flag a lower-than-anticipated third-quarter operating margin at the streaming company. Tesla is scheduled to report its latest returns following the closing bell, while luxury bag maker Hermes hints at improvement in demand at its key Chinese market and bargain-hunting helps spur a rebound in gold prices.

1. Futures subdued

U.S. stock futures were muted on Wednesday, with investors digesting a slew of corporate earnings and eyeing the aftermath of an abrupt fall in gold.

By 03:39 ET (07:39 GMT), the Dow futures contract had inched up by 38 points, or 0.1%, S&P 500 futures had ticked higher by 10 points, or 0.1%, and Nasdaq 100 futures were mostly unchanged.

The main averages on Wall Street notched a mixed close on Tuesday. Growing concerns over elevated stock valuations and the questions it raises around a recent rally in equities loomed large.

Geopolitical uncertainty captured much attention as well. President Donald Trump suggested that a much-anticipated meeting with Chinese counterpart Xi Jinping in South Korea later this month may not happen, denting otherwise upbeat hopes around a potential easing in renewed trade tensions between the world’s two biggest economies. However, Trump said that, should the meeting end up taking place, it would be "very successful," adding that he expects to secure a "fantastic" and "fair" trade agreement with Xi.

At the same time, a possible summit between Trump and Russia’s Vladimir Putin was put on hold after Russian officials reportedly indicated that there was no intention to end an ongoing war in Ukraine.

2. Netflix margins pressured by Brazil tax battle

Shares of Netflix sank in extended hours trading, weighed down by a third-quarter operating margin from the streaming giant which missed Wall Street expectations.

At 28%, the company’s margin was just short of forecasts, due largely to charges related to a spat with tax authorities in Brazil. Absent the expense, the margin would have beat estimates, Netflix said.

The Brazilian issue is also seen hitting full-year margins. Netflix slashed its annual outlook for the figure to 29% from 30%.

Still, revenue and profit for the period grew, powered by the firm’s best-ever quarter for advertising sales, along with a jump in membership and higher prices.

3. Tesla to report

A parade of corporate returns marches on later today, highlighted by the release of numbers from electric vehicle titan Tesla after the close of U.S. markets.

The company unveiled record third-quarter deliveries earlier this month, fueled by a marketing and discounting campaign aimed at boosting sales prior to the withdrawal of a $7,500 U.S. tax credit for EV buyers. Worries have, in turn, swirled around how Tesla’s performance will be impacted following the expiration of the tax credits.

However, as analysts at Vital Knowledge said, "earnings reports for this company are nearly irrelevant as the bulk of the narrative and equity value isn’t related to the core business of manufacturing and selling autos but instead hope and hype for products that won’t impact income statement in a material way for years to come."

CEO Elon Musk and Tesla have long touted the benefits of initiatives like robotaxis and full self-driving technology.

Tesla’s stock price has surged by more than 16% so far this year, bolstered in part by its board’s proposal of a massive new pay package for Musk, who has also purchased more shares.

Elsewhere on the earnings docket, telecoms group AT&T, electric services name GE Vernova, and biotech firm Thermo Fisher are set to report before the opening bell on Wall Street.

4. Hermes underlines slight improvement in China demand

Meanwhile, in Europe, Paris-listed shares of Hermes inched higher in early trading on a slight sales improvement at the Birkin bag maker’s key Chinese market in the third quarter.

Hermes CFO Eric de Halgouet said the stronger returns in the country were reflective of a stabilization in property prices in large cities as well as positive stock market trends.

China is one of the most crucial regions for the luxury industry. A protracted real estate crisis and a sluggish economic recovery have dented demand for high-end goods in recent quarters, although Hermes’ announcement, coupled with comments from peers like L’Oreal and LVMH, suggests a sense of guarded optimism in the sector.

Group-wide quarterly sales at Hermes, known for its pricey leather goods such as Constance and Kelly bags, increased by 9.6% to 3.88 billion euros. Analysts ahad anticipated 10% growth, according to Visible Alpha estimates cited by Reuters.

5. Gold volatile

Gold prices slumped on Wednesday, extending a dramatic sell-off despite an earlier recovery wave.

Attention was also turning to key U.S. inflation data due later in the week, which could factor into how the Federal Reserve approaches the trajectory of interest rates in the coming months. It may also be one of the only updated official economic indicators the central bank receives before its next gathering on October 28-29, due to an ongoing federal government shutdown that has delayed a series of key data releases.

Spot gold was down 2.1% at $4,039.48 per ounce as of 07:07 ET. U.S. gold futures fell 1.4% to $4,050.64/oz.

The yellow metal slumped more than 5% on Tuesday, marking its steepest one-day decline since 2020, in a bout of heavy volatility in bullion. Prices had surged to record highs earlier this week, buoyed by geopolitical concerns and expectations of U.S. monetary easing.