Strong Corporate Earnings Push Indexes Higher

STOCK INDEX FUTURES

The indexes are higher as investors welcomed a fresh batch of strong corporate earnings. Apple climbed nearly 2% in premarket trading after topping revenue expectations and issuing an upbeat holiday forecast. Amazon surged almost 13% following its fastest cloud-unit growth in nearly three years, while Netflix advanced around 2% after announcing a 10-for-1 stock split. Chevron added 0.5% after reporting better-than-expected earnings and revenue. In contrast, Exxon Mobil slipped roughly 1.8% as its quarterly profit declined year over year.

Elsewhere on the corporate front, Google/Alphabet, Microsoft, and Meta reported mixed results. Strong AI demand powered Google’s result, while both the core advertising and cloud computing businesses beat revenue expectations. Google also raised its projected capital expenditures for the year to between $91 billion and $93 billion. Meta recorded a nearly $16 billion one-time charge in the third quarter as a result of the Big Beautiful Bill and said its capital expenditures next year would be larger than in 2025. Shares of the company fell the company announced a $25 billion bond sale. Microsoft shares also fell as a higher-than-expected capital expenditure number spooked investors.

US-China trade talks did little to excite markets, while a hawkish tone out of the Fed led to a wave of selling. The US will lower the overall tariffs on Chinese imports from 57% to 47%, while China pledged to work to end the flow of fentanyl ingredients into the US and increase purchases of US soybeans. The Fed cut rates by 25 bps, but Fed Chair Powell offered a hawkish tone in his post-meeting presser, reminding markets that the Fed is not on autopilot and that a rate cut in December was “not a foregone conclusion.”

CURRENCY FUTURES

US DOLLAR: The USD index nudged higher, as the greenback is set to rise nearly 2% for October after Fed Chair Powell struck a hawkish tone following the Fed’s rate cut and said that a December rate cut was not a foregone conclusion. Market-implied odds of a rate cut fell. Market odds of the Fed delivering another quarter-point cut in December have eased to around 65%, after having been nearly fully priced before Wednesday’s decision. Powell also noted that a policy divide within the central bank and a lack of data due to the shutdown will make it difficult for the Fed to cut rates again. Meanwhile, currency markets were largely muted following the Trump-Xi meeting, where the leaders signed a trade and tariff truce. Tariffs on China will be cut by 10%, and China will resume purchasing US soybeans, among some of the details. The lack of reaction in the currency market suggests that while the deal is a positive, investors remain cautious on the long-term prospects of US-China trade relations.

EURO: The euro held steady in overnight trade following a release of several pieces of economic data. Eurozone inflation eased from 2.2% in September to 2.1% in October, in line with expectations. Meanwhile, core prices rose at an annualized rate of 2.4%, matching September’s reading although higher than an expected 2.3%. Germany, France, and Italy saw moderating price pressures, while Spain recorded a slight uptick. Germany’s retail sales rose 0.2% month-over-month in September, marking the first increase since June, in line with expectations. The European Central Bank kept rates steady in a widely expected move on Thursday while offering no hints about future moves. The eurozone economy picked up speed in the third quarter, growing more than expected. GDP grew 0.2%, beating out forecasts of a 0.1% rise; on an annualized basis, GDP clocked in at 1.3%, higher than forecasts of a 1.2% growth. For the ECB, it enjoys a rare period of low inflation and steady growth. The bank has made clear it is in no rush to change policy given that inflation is next to target and that growth is stable. It is unlikely the ECB will move to cut rates anytime soon, especially as downside risks have largely subsided.

BRITISH POUND: The pound slipped, extending losses below $1.32, to reach its weakest level since April, pressured by a stronger dollar, political developments, and as markets have increased bets of a Bank of England rate cut this year, albeit somewhat modestly. Prime Minister Keir Starmer declined to renew his no-tax-hike pledge, citing worsening economic forecasts. Meanwhile, the Office for Budget Responsibility plans to downgrade the UK’s productivity growth forecast by about 0.3%, which would amount to a £20 billion gap in public finances and add pressure on Finance Minister Rachel Reeves to address the shortfall. Concerns that an increase in taxes will weigh on businesses, households and overall economic activity have led to sterling weakness. Elsewhere, the Nationwide Housing Price Index surprised to the upside, showing selling prices of homes rose 0.3% in October, above forecasts of no change. This comes on the heels of CPI inflation data for September that came in weaker-than-expected. Inflation held at 3.8%, showing no changes from the previous month after rising 0.3% in August. Inflation is expected to continue to moderate, offering the BoE a potential reprieve if those expectations are reflected in upcoming data. Money markets are now pricing in a 68% chance of a rate cut by year-end, up from 50% before last week’s inflation data was released. The BoE is likely to be highly divided when it votes on interest rate moves in November.

JAPANESE YEN: The yen held stable on Friday after Japan’s finance minister said the government was monitoring foreign exchange movements with a high sense of urgency. Additionally, hotter-than-expected Tokyo core CPI inflation supported the yen. Tokyo core CPI rose 2.8% on the year, above expectations for a 2.6% rise and a rise above the last reading of 2.5%. The rise in inflation complicates the Bank of Japan’s policy outlook as it balances inflation control, currency stability, and economic growth, while domestic worries over yen depreciation mount. Finance Minister Satsuki Katayama said on Thursday she would not stand by remarks she made in March suggesting the yen’s real value is closer to 120-130 per dollar, citing her current position as minister overseeing currency policy. She said the Bank of Japan’s decision to keep interest rates steady on Thursday was extremely reasonable, and took into account overall current economic conditions. The BoJ maintained interest rates at 0.5% as expected on Thursday, although repeated its intention to continue to increase rates in the future. Markets took the BoJ’s tone as cautious, with only two policymakers calling for a rate hike, the same as in September, highlighting what could be a very gradual approach to raising rates. BoJ Governor Kazuo Ueda also offered little detail on when the central bank could next raise rates in his post-meeting press conference. The bank also left its economic and price projections nearly unchanged, which signals that the bank is in no rush to raise rates anytime soon, and with only one meeting left before year-end, it appears uncertain that any policy tightening will happen before 2026. That being said, there is quite some time for economic developments to shape the BoJ into a place where it can raise rates.

AUSTRALIAN DOLLAR: The Aussie fell against the dollar as data showed that producer prices climbed 1.0% quarter-on-quarter in Q3, marking the fastest pace in a year, accelerating from 0.7% and surpassing market estimates. This follows CPI data surprised to the upside earlier in the week. Consumer prices rose 1.3% in the third quarter, above expectations of a 1.1% increase. Annual CPI inflation rose to 3.2%, up from 2.1%. The Trimmed Mean CPI, a key measure of inflation, rose 1.0% in the third quarter, above expectations of a 0.8% rise. The figures now put inflation above the Reserve Bank of Australia’s target band and have nullified any hopes that the central bank will cut interest rates in November and dim prospects for future policy loosening in the near term. Swaps show under a 7% chance of easing next week, and markets have also scaled back rate cut expectations for December and February. Governor Michelle Bullock recently downplayed the spike in unemployment that saw bets for a November rate cut rise, reiterating the board’s cautious approach to policy, signaling that the central bank will likely need to see a convincing downtick in inflation as a precursor to cut rates again.

INTEREST RATE MARKET FUTURES

Futures little changed across the curve after a light volume trade overnight after another day of selling in Treasurys on Thursday. Fed Chair Powell’s hawkish tone in his post-meeting presser has led markets to significantly scale back expectations of a December rate cut. Markets are showing a 65% chance of a rate cut, compared to being nearly fully priced in before the decision. Powell also said that the shutdown will make it more difficult for the Fed to cut rates in December as it limits access to key economic data. There are strongly differing views among policy members regarding how to proceed in December, and paired with an absence of data and inflation that is still resting well above the Fed’s target, there is likely to be strong resistance to continue to lower rates. Economic activity continues to expand at a moderate pace and business investment is expanding despite tighter financial conditions. Both of those factors could encourage the Fed to keep rates on hold in December. Regarding inflation, Powell said that the Fed’s base case is that tariffs’ effects on inflation will be short-lived.

Regarding quantitative tightening, the Fed announced the end date would be December 1, farther than market expectations of an October 31 end, which added to the selling pressure. The Fed said it will be rolling over the entirety of maturing Treasury securities and reinvesting its MBS assets into Treasury bills, aiming to temper recent stress in overnight funding markets.

The spread between the two- and 10-year yields stayed at 48.30 bps, while the 2-year yield, which reflects interest rate expectations, moved lower to 3.608%.

Interested in more futures markets?  Explore our Market Dashboards here.