By Geoffrey Smith
Investing.com -- Netflix stock jumps as the streaming giant returns to subscriber growth. Tesla earnings are also expected to have rebounded after a tricky second quarter. Nestle and - most likely - Procter & Gamble underline the pricing power of the big consumer companies. Housing starts are set to fall again as mortgage rates rise. Russia prepares to evacuate the city of Kherson, which it annexed earlier this month, and oil steadies after slumping in response to Joe Biden's decision to release yet more oil from the Strategic Petroleum Reserve. Here's what you need to know in financial markets on Wednesday, 19th October.
1. Netflix returns to subscriber growth, but strong dollar hits profit
Netflix (NASDAQ:NFLX) stock jumped in premarket after the streaming giant returned to growth in style after losing subscribers in both of the last two quarters.
The company gained a net 2.4 million subscribers in the three months through September, helping revenue to a 5.9% gain on the year. However, profit fell 3.5% to $1.4 billion, as the dollar's strength ate into the value of its overseas earnings.
After the bell tonight, Tesla (NASDAQ:TSLA) will become the next of the tech mega caps to report earnings. Analysts expect profit to rebound to $3.2 billion after slumping in the second quarter due to the disruption of its operations in Shanghai. The market is likely to focus, however, on its production forecasts for the coming quarters, amid fears that neither the Shanghai plant nor the new operation in Germany are operating smoothly.
2. Housing starts, Mortgage data due
The U.S. will report housing starts and building permit data for September at 08:30 ET (12:30 GMT), which are expected to confirm a further slowdown in the housing market due to the sharp rise in interest rates this year.
The National Association of Home Builders reported another slump in activity in its monthly report released on Tuesday, saying that buyer interest was all but dead after a massive rise not only in the cost of new homes but also in the cost of servicing the loans needed to buy them.
Data from the Mortgage Bankers Association at 07:00 ET will show whether the 30-year mortgage rate has pushed through 7% for the first time since 2002.
3. Stocks set to extend gains; Nestle sets stage for strong P&G quarter
U.S. stock markets continue to shrug off developments in the housing market as an outlier, however. The market is set to extend its gains for a third day at the open, with risk appetite returning after a string of earnings that have exceeded carefully managed expectations – even if many are down year-on-year.
By 6:20 ET, Dow Jones futures were up 58 points or 0.2%, while S&P 500 futures were up 0.3%, and Nasdaq 100 futures were up 0.5%. All three cash indices had made gains of around 1% on Tuesday, amid well-received reports from Goldman Sachs (NYSE:GS) and Johnson & Johnson (NYSE:JNJ), with Netflix and United Airlines (NASDAQ:UAL) ramming home the point after the close.
Procter & Gamble (NYSE:PG) and Abbott Labs (NYSE:ABT) report early, while IBM (NYSE:IBM), Lam Research (NASDAQ:LRCX) and PPG (NYSE:PPG) join Tesla in reporting after the bell.
P&G's numbers will follow an update from fellow consumer giant Nestle (SIX:NESN), which like PepsiCo (NASDAQ:PEP) pushed through big price increases to offset falling sales volumes. Chipmaking equipment group ASML (AS:ASML) also reported better than expected sales and margins overnight.
4. Russia on the defensive in southern Ukraine
The Russian-installed governor of the city of Kherson in southern Ukraine said the evacuation of civilians from the city had begun, in the latest embarrassment to President Vladimir Putin's imperial ambitions.
Earlier, Russia's new supreme commander Sergey Surovikin had admitted that "extremely difficult decisions" would have to be taken due to the increasing pressure on the Russian forces around the city, which have been forced onto the defensive and steadily pushed back in recent weeks.
Elsewhere, Russia continued its wave of drone strikes against Ukrainian civilian infrastructure. President Volodymyr Zelensky said around one-third of the country's power stations had been taken offline, at least temporarily, causing widespread blackouts.
"Cutting off men, women, children of water, electricity and heating with winter coming - these are acts of pure terror," said European Commission President Ursula von der Leyen.
5. Oil steady after slumping on Biden's new SPR release
Crude oil prices steadied after slumping late on Monday in response to U.S. President Joe Biden's plans to release another 15 million barrels of oil from the Strategic Petroleum Reserve.
The move is intended to ease pump prices - which have crept up again in response to the OPEC+ decision to cut output from November - ahead of the mid-term elections. The Biden administration said the U.S. oil industry should take the move as a signal to increase its own production. With the U.S. rig count now at its highest since March 2020, there are signs that producers are starting to do just that.
By 6:30 ET, U.S. crude futures were up 1.4% at $83.25 a barrel, having fallen below $82 briefly overnight. Brent was up 1.3% at $91.20. The government's weekly inventory data are due at 10:30 ET, as usual.